Report: Budget Vote 35: Tourism

REPORT OF THE PORTFOLIO COMMITTEE ON BUDGET VOTE 35: TOURISM

The Portfolio Committee on Tourism, having considered the Budget Vote No. 35 and Medium Term Strategic Frameworks, Strategic Plan and Annual Performance Plan of the National Department of Tourism and South African Tourism, reports as follows:

1. INTRODUCTION

The Constitution of South Africa (Act No. 108 of 1996) recognises that the Legislative Authority has an important role to play in the overseeing both the financial and non-financial performance of government departments and public entities.

In terms of section 10 of the Money Bills Amendment Procedure and Related Matters Act of 2009, (Act No 9 of 2009) the member of the Executive must table strategic plans after the adoption of the Fiscal Framework by Parliament.

It is important for the strategic plans to be tabled within the stipulated period because the plans provide information for the budget review process of the relevant Portfolio Committee.

The budget and including the annual performance plan and strategic plan form the basis of the annual report. The Public Service Commission in its report “Evaluation of the Department’s Annual Reports as an Accountability Mechanisms” clearly states that the emphasis on measurable objectives, which should be part of the strategic plan, is to create a contract between Parliament and the relevant Minister regarding specific deliverables for which the Minister can be held accountable.

2. THE COMMITTEE PROCESS

The above exercise explains the importance of the budget and strategic plan process in the calendar of Parliament and the necessity for departments to table these on time to ensure that Parliament is provided with information required for its oversight work.

On the 7 ^th March 2012, the Minister of Tourism tabled to Parliament the Strategic Plan of the Department of Tourism for 2010/11 to 2014/15 financial years together with annual performance plan (review) of the department for 2012/13; and

Updated Strategic Plan of South African Tourism for 2012/17 financial years and annual performance plan for 2012/13 for consideration and report.

Upon referral of these instruments by the National Assembly, the committee scheduled two extended briefing sessions, first with South African Tourism; second with the National Department of Tourism so as to present their strategic plans, annual performance plan and budget for the ensuing financial years on 13 March and 17 April 2012 respectively.

The engagement simultaneously reviewed the past performance of the Department of Tourism and South African Tourism. The Minister and Deputy Minister attended the first briefing session, while the delegation was led by the Director General and the senior management during the second briefing.

3. NATIONAL DEPARTMENT OF TOURISM

3.1 Minister’s Overview

Minister Van Schalkwyk said that tourism is poised to play a greater role than ever before, both on the global stage and in the lives of South Africans. However, tourism is about much more than the policies, statistics and objectives that often talked about. It is about people. The year 2011 was a good year for global travel and tourism, though growth was not as strong as in 2010. The last few months of 2011 witnessed a slight slowdown, but tourist arrivals still grew to 980 million in 2011. Globally, international tourism will top 1 billion trips this year. The United Nations World Tourism Organisation (UNWTO) expects international arrivals in 2012 to increase by 3% to 4%, which is recorded in 2011.

Being labour-intensive sector with a supply chain that cascades deep into the national economy and across all communities, tourism is positioned as a priority sector in Governments planning and policy frameworks.

In 2011, the tourism sector worldwide supported 258 million direct, indirect and induced employment opportunities, just under 9% of the global workforce. Of these, 100 million were direct jobs, which means, that every single employment opportunity in the direct tourism economy supports another 1.6 indirect jobs.

During the 2008/09 global economic downturn, tourism also played a critical anti-cyclical role in support of national economy, and contributed significantly to gross domestic product, foreign exchange earnings and poverty reduction. In South Africa , as in the rest of the world, tourism remains one of the fastest-growing economic sectors, with huge potential for future job creation and social inclusion, in particular with regard to women and young people.

The tourism sector’s success story of the past decade can easily lead to complacency. However, government understand that markets are continuously shifting and consumer preferences evolving. That is why government rely heavily on the best available market research and information about emerging demand patterns. The new opportunities in Africa and emerging markets are well understood, as is the need and work even harder for every inch of market share in traditional markets. Recent tourist arrivals statistics from January to November 2011 was very positive.

Emerging markets like China and India showed growth of 27.2% and 22% respectively. Whereas, the traditional markets like the USA (0.6%) and European countries (i.e Germany 9.9%) showed smaller growth and stability. This is exceptional well to effectively market SA destination to the world, including the continent. Arrival targets for Africa over the last 5 years were very positive, with Mozambique , Angola and Nigeria showing the highest arrival to South Africa .

South African Tourism’s focus on the African continent:

v Africa delivers more than 70% of all arrivals every year.

v Tourist arrivals from Africa grew at 10.3% annually from 2003 to 2010. Africa’s contribution to the total tourist arrivals to South Africa increased from 68.1% in 2003 to 77.0% in 2010.

v Tourist arrivals from Africa to South Africa increased at a much faster rate of 10.3%, compared to growth of 3.3% in tourist arrivals from rest of the world, during 2003 to 2010.

v The value Africa brings to the South African economy goes beyond tourism (i.e, hotels and attractions), and has major benefits for the whole economy (especially in manufacturing and other downstream industries); and

v South Africa has the potential to further exploit its proximity and strength as a choice destination in the African market, which is still emerging from purose-based travel into a true leisure-driven tourism market.

SA Tourisms objectives to drive growth from the continent:

v Increasing regional awareness of South Africa as a tourism and leisure destination.

v Increase arrivals and spend from Africa to GDP and job creation.

v In SADC, market penetration is high but opportunities exist to promote repeat travel and to turn shoppers into holiday travel.

v In Africa Air markets, sizable opportunity exists to attract high value business and leisure traveller.

v Setting up five marketing offices in key African markets by 2020; and

v Implementation of regional tourism programmes.

Utilisation of government grant: Project Growing Tourism from Africa - The intention was also to open five SA Tourism offices in Africa by 2015. Funding is available for the focus on Africa

v 2012/13 – R50 million

v 2013/14 – R84 million

v 2014/15 – R84 million

Domestic tourism comprised: The backbone of any tourism industry is also in its domestic market. With domestic tourism contributing over 70% of country’s tourism volume as well as sustaining and creating much-needed jobs, building the domestic tourism market is a priority. Domestic tourism growth will not only assist South Africa to hedge against global economic instability, but there are huge socio-economic and experiential benefits to be unlocked for domestic tourists and hosting communities alike. The Department will work with the tourism industry to encourage fellow South Africans to enjoy the magnificent variety and authenticity that SA destination has to offer. The Department is also on the verge to launch Domestic Tourism Strategy and this strategy together with SAT’s Domestic Tourism Campaign (Sho’t Left) will yield good results.

Tourism will continue to address issues raised by the President in his State of the Nation address in 2011 and 2012 respectively. To ensure the achievement of the sector’s targets, the Department will continue to work hard to implement the National Tourism Sector Strategy (NTSS). This, however, is not an end in itself. What is important is to translate increasing arrivals into broader economic benefits for the people. Working with other government institutions and relevant stakeholders, the Department will also play a more active role in addressing travel barriers, including visa processing, airlift, enabling infrastructure and the development of cultural industries. A critical area for sustainable and global competitiveness of the sector is the development and improvement of public and private tourism infrastructure.

Departments key policy priorities for 2012/3

The national Department of Tourism aims to promote and support the growth and development of an equitable, competitive and sustainable tourism sector in order to enhance the Department’s contribution to national priorities. [1]

The State of the Nation Address (SoNA) has placed infrastructure development such as roads, railways, airports and electricity in the centre of the year’s national priorities. [2] This move is seen as a great stride towards ensuring tourism growth and development. In the past year oversight had outlined the lack of infrastructure in some provinces as the biggest hurdle towards ensuring that the country’s tourism potential is realised. [3] There was also going to be greater investment in cultural and heritage tourism which will go a long way in revitalising heritage and cultural tourism. However this move requires that heritage and cultural heritage sites be kept at an acceptable tourism level. The refocus on such sites would benefit poor and rural communities. [4]

The Department identified key priorities in line with the national priorities of government’s New Growth Path (NGP) and the current SoNA. Since tourism is one of the priority sectors in the NGP, the Department is doing its best to ensure that these key priorities are well aligned with government’s objectives in order to receive/acquire the desired results. The key priorities as identified by the Department are as follows: [5]

· Promoting job creation;

· Developing rural, cultural, heritage and domestic tourism;

· Facilitating skills development in the tourism sector;

· Providing quality assurance;

· Promoting service excellence;

· Facilitating transformation of the sector;

· Providing opportunities for youth;

· Promoting entrepreneurship;

· Increasing investment in the tourism sector;

· Promoting responsible tourism;

· Expanding tourism infrastructure;

· Facilitating product development;

· Coordinating stakeholder cooperation and partnerships;

· Strengthening information and knowledge management; and

· Growing the market locally and internationally from a tourism perspective.

These key priorities of the Department are well aligned with the key national priority; which seeks to significantly reduce the unemployment rate especially among the young people in our country. [6] Since, for the unemployment rate to be significantly reduced, it is important for the respective departments to create an environment conducive to growth.

3.2 Performance and Service Delivery Information

The Industrial Policy Action Plan 2(IPAP 2) identifies tourism as one of the important drivers for job creation in line with the general understanding that tourism has low barriers of entry for entrepreneurs. The Department has the Expanded Public Works Programme (EPWP) which is supposed to address issues of job creation as well as infrastructure development. [7]

The Department is well underway in terms of its targets for the 2011/2012 financial year, having successfully reached the half mark in a number of its programmes by the end of the first half of the 2011/2012 financial year. The concerns, however, for the Administration Programme would be to ensure that issues such as the vacancy rate and the work skills plan be addressed. The Department also reported to have had positive results with regard to compliance with performance and risk management prescripts; compliance relating to regulatory requirements and finally the progress made with regards to scheduled international agreements.

In terms of procurement from Broad Based Black Economic Empowerment (BBBEE) and Black Economic Empowerment (BEE) enterprises, the Department is on track, through achieving 56 per cent for the first half with the target being set at 59 per cent. The communication strategy of the Department needs to boost its performance where the implementation plan is concerned, due to the fact that for a number of projects to bear the necessary fruits there should be effective communication. The target set for this indicator was 100 per cent and by the end of the first half of the year under review the Department had only implemented 23.5 per cent of the strategy. However it must also be noted that the Department was doing well in terms of high level media interventions that led to media coverage, the Department was able to get six out 8 interventions by the first half.

The Department had not reached the half target mark by the end of the first half of the year for the Expanded Public Works Programme (EPWP), in as much as there was improvement in the programme as compared to its performance in the 2010/2011 financial year - hence more effort is required to ensure this programme delivers the temporary and full time job opportunities. This will further improve the Department’s contribution towards decent work through sustainable projects. [8] The Department actually fell short of its half term target by 727 full time equivalent jobs; but when considering the target for the number of projects funded by the EPWP (65 projects as compared to the target of 45) it is easy to assume that the target for the full time jobs can still be met within the financial year. This can only be true if these funded projects are all successful and further sustainable. As with the previous year other projects fell through the cracks. [9]

The intake for young chefs for the year under review was reported to be 767 and 531 graduated and the target was set at 800, it is however difficult to gather whether there will still be a second in-take that will cover the remaining students in order for the Department to meet its target. The Department has also met its target with regards to the rural prjects supported, getting two out of two. [10] The Department has over the years done work on niche product development and this year it has developed a strategy for avitourism, however it is also important for the Department to do an evaluation of how these strategies have paid off, for example the recent report on cruise tourism. [11]

The Department had thus far supported 357 rural enterprises out of the targeted 530; this achievement places the Department ahead of its 50 per cent mark by the end of the first half of the 2011/2012 financial year. The Department is, however, behind on meeting the target set at 3 351 for support of Historically Disadvantaged enterprises having only supported 1 122 enterprises. The Department had set a target of 20 black SMMEs to be supported on a mentorship programme, and of the 20 targeted only two have been identified and supported.

The programmes for youth development are all on track as some of the targets have been met while other programmes were above the 50 per cent mark and finally the target set for the roll out of the National Tourism Sector Strategy (NTSS) was set at 15 and to date 14 district municipalities have already had work-shops in three provinces.

The most worrying factor is that the Department’s Strategic Plan in some instances is characterised by Key Performance Indicators (KPIs) which are not necessarily within the Department’s power to deliver but is dependent on other departments. The Department needs to work hard at creating platforms that allow for these issues to be discussed and further develop ways of addressing overlapping issues.

3.3 Budget Analysis

The Department carries out its mandate through four programmes (Table 35.1). The budget is expected to grow at a moderate rate reaching R1.6 billion in the Medium Term Expenditure Framework (MTEF) due to an additional allocation of R218 million for South African Tourism to expand its work in growing the number of tourists visiting from other African states . [12] Table 35.1 shows the programme allocation for the Department of Tourism’s budget.

Table 35.1

Programme	Budget				Nominal Rand change	Real Rand change	Nominal % change	Real % change
R million	2011/12	2012/13	2013/14	2014/15	2011/12-2012/13		2011/12-2012/13
Programme 1:Administartion	185.9	195.0	206.7	218.8	9.1	- 1.8	4.90 per cent	-0.95 per cent
Programme 2: Policy and knowledge services	695.5	788.0	861.4	908.0	92.5	48.6	13.30 per cent	6.99 per cent
Programme 3: International Tourism	33.7	46.8	48.8	51.7	13.1	10.5	38.87 per cent	31.14 per cent
Programme 4: Domestic Tourism	349.8	337.5	378.5	401.7	- 12.3	- 31.1	-3.52 per cent	-8.89 per cent
TOTAL	1 264.9	1 367.3	1 495.4	1 580.2	102.4	26.2	8.10 per cent	2.07 per cent

National Treasury (2012) – Vote 35 Tourism

An increase of 8.10 per cent in the Department’s allocation has been observed for the budget year 2012/2013 in nominal terms although in real terms (after taking inflation into account) that translates to a mere 2.07 per cent (Table 1). This is due to an increase in three of the programme budgets.

The four programmes have been changed from their initial representation in the previous financial years (2010/2011 to 2011/2012). The Administration Programme has remained the same and the last three programmes have been renamed as follows:

· Programme 2: formerly known as Tourism Development is now known as International Tourism and consists of the following sub-programmes (International Tourism Management; Tourism Development in the Americas and the Caribbean; Tourism Development in Europe; Tourism Development in Africa and the Middle East and Tourism Development in Asia and Australasia ).

· Programme 3: formerly known as Tourism Growth and it is currently known as Domestic Tourism and consists of the following sub-programmes (Domestic Tourism Management; Domestic Tourism Management: Southern Region Domestic Tourism Management: Northern Region; Social Responsibility Implementation; and Strategic Partners in Tourism).

· Programme 4: formerly known as Policy, Research, Monitoring and Evaluation is now know as Policy and Knowledge Services and consists of the following sub-programmes (Policy and Knowledge Services Management; Policy Development and Evaluation; Research and Knowledge Management and South African Tourism (SAT).

3.4 Programme Analysis

Programme 1: Administration

Table 35.2: Budget analysis for Programme 1

Programme	Budget				Nominal Rand change	Real Rand change	Nominal % change	Real % change
R million	2011/12	2012/13	2013/14	2014/15	2011/12-2012/13		2011/12-2012/13
Sub Programme 1: Ministry	32.5	32.9	37.4	39.6	0.4	- 1.4	1.23 per cent	-4.41 per cent
Sub Programme 2: Management	10.7	16.6	17.2	18.2	5.9	5.0	55.14 per cent	46.50 per cent
Sub Programme 3: Cooperate Affairs	120.7	121.5	127.1	134.5	0.8	- 6.0	0.66 per cent	-4.95 per cent
Sub Programme 4: Office Accommodation	22.0	24.0	24.9	26.4	2.0	0.7	9.09 per cent	3.01 per cent
TOTAL	185.9	195.0	206.6	218.7	9.1	- 1.8	4.90 per cent	-0.95 per cent

Source: National Treasury (2012) – Vote 35 Tourism

The budget allocated to the Administration Programme is for strategic governance and risk management; legal, Corporate Affairs, information technology, and strategic communications support services to the Department, and has increased from R185.9 million in 2011/2012 to R195 million in 2012/2013. This represents a nominal increase of 4.9 per cent; but after adding inflation a decrease of 0.95 per cent in real terms. This programme constitutes 14.7 per cent of the Department’s total budget, most of which will be spent through the Corporate Affairs sub-programme, which will be used for IT services, furniture for the new offices and security equipment for the building. A further R12 million has been set aside for consultants to provide support to the Department’s internal audit.

Programme 2: Policy and knowledge services

Table 35.3: Budget analysis for Programme 2

Programme	Budget				Nominal Rand change	Real Rand change	Nominal % change	Real % change
R million	2011/12	2012/13	2013/14	2014/15	2011/12-2012/13		2011/12-2012/13
Sub Programme 1: Policy and Knowledge Services Management	3.8	3.4	3.6	3.8	- 0.4	- 0.6	-10.53 per cent	-15.51 per cent
Sub Programme 2: Policy Development and Evaluation	10.7	18.1	17.6	18.7	7.4	6.4	69.16 per cent	59.73 per cent
Sub Programme 3: Research and Knowledge Management	12.4	13.2	14.2	15.1	0.8	0.1	6.45 per cent	0.52 per cent
Sub Programme 4: South African Tourism	668.6	753.3	825.9	870.5	84.7	42.7	12.67 per cent	6.39 per cent
TOTAL	695.5	788.0	861.3	908.1	92.5	48.6	13.30 per cent	6.99 per cent

Source: National Treasury (2012) – Vote 35 Tourism

The budget allocation for the Policy and Knowledge Services Programme, which has received the largest allocation in the budget increased by 13.30 per cent in real terms from 2011/2012 financial year. This programme is entrusted with ensuring strategic tourism sector policy development, monitoring and evaluation, and research and knowledge management services. The South African Tourism sub-programme which is tasked with the marketing of South Africa internationally and locally consumes 96 per cent of the programme budget. [13] The emphasis on spending throughout the MTEF will be on increasing the number of tourists visiting from other African countries; and will be important for the Department to capitalise on the recent opening of a new office in Angola . A further R8.6 million will be spent on consultants to support the development of a visitor information centre and national tourism information gateway space planning. [14]

Programme 3: International Tourism

Table 35.4: Budget analysis for Programme 3

Programme	Budget				Nominal Rand change	Real Rand change	Nominal % change	Real % change
R million	2011/12	2012/13	2013/14	2014/15	2011/12-2012/13		2011/12-2012/13
Sub Programme 1: International Tourism Management	11.6	3.9	4.2	4.4	- 7.7	- 7.9	-66.38 per cent	-68.25 per cent
Sub Programme 2: Americas and Caribbean	7.5	11.5	11.9	12.6	4.0	3.4	53.33 per cent	44.79 per cent
Sub Programme 3: Europe	6.0	9.2	9.6	10.2	3.2	2.7	53.33 per cent	44.79 per cent
Sub Programme 4: Africa and Middle East	4.3	12.8	13.3	14.1	8.5	7.8	197.67 per cent	181.09 per cent
Sub Programme 5: Asia and Australasia	4.3	9.4	9.7	10.3	5.1	4.6	118.60 per cent	106.43 per cent
TOTAL	33.7	46.8	48.7	51.6	13.1	10.5	38.87 per cent	31.14 per cent

Source: National Treasury (2012) – Vote 35 Tourism

The International Tourism Growth Programme is responsible for the development and support of South Africa ’s tourism potential throughout the various regions of the world. This programme increased by a significant 38.87 per cent in nominal terms from R33.7 million in 2011/2012 to R46.8 million in 2012/2013; this significant change is attributed to the relocation of the international relations’ Chief Directorate from the Administration Programme to this programme. This increase will also allow for staff to travel locally and abroad for marketing purposes. A further R5 million is to be spent on consultants in the MTEF.

Programme 4: Domestic Tourism

Table 35.5: Budget analysis for Programme 5

Programme	Budget				Nominal Rand change	Real Rand change	Nominal % change	Real % change
R million	2011/12	2012/13	2013/14	2014/15	2011/12-2012/13		2011/12-2012/13
Sub Programme 1: Domestic Tourism Management	6.3	11.0	11.5	12.7	4.7	4.1	74.60 per cent	64.88 per cent
Sub Programme 2: southern Region	9.7	11.9	12.3	13.0	2.2	1.5	22.68 per cent	15.85 per cent
Sub Programme 3: Northern Region	11.1	12.2	12.7	13.4	1.0	0.4	9.23 per cent	3.14 per cent
Sub Programme 4: Social Responsibility implementation	302.7	277.4	312.0	330.7	- 25.3	- 40.7	-8.34 per cent	-13.45 per cent
Sub Programme 5: Strategic Partners in Tourism	20.0	25.0	30.0	31.8	5.0	3.6	25.00 per cent	18.04 per cent
TOTAL	349.8	337.5	378.5	401.6	- 12.3	- 31.1	-3.52 per cent	-8.90 per cent

Source: National Treasury (2012) – Vote 35 Tourism

The Department’s budget allocation for the Domestic Tourism Programme has decreased by 3.52 per cent in nominal terms from R349.8 million in 2011/2012 to R337.5 million in 2012/2013. This decrease is due to the decrease in the Social Responsibility implementation sub-programme allocation; this was due to the Department’s failure to meet job creation targets. [15] This programme is responsible for the promotion, development, and growth of sustainable domestic tourism throughout South Africa . The spending focus will mostly be on the Social Responsibility implementation sub-programme which focuses on infrastructure projects under the EPWP programme targeting the youth, disabled, woman and SMMEs. An amount of R3.9 million will also be set aside for consultants who will be providing business support and advisory services.

4 SOUTH AFRICAN TOURISM

The core mandate of South African Tourism (SAT) is to position South Africa as a tourism destination of choice. The entity’s key activities include promoting tourism by encouraging potential visitors to travel to and within South Africa and ensuring the highest quality standards of tourism services and facilities.

The key objectives include increasing:

Ø The annual volume of international tourists visiting the country.

Ø The average-spend per tourist.

Ø International brand awareness of South Africa as a travel destination; and

Ø The number of graded accommodation establishments.

SAT was established with the aim of stimulating sustainable international and domestic demand for South African tourism experiences as well as to institute measures aimed at the maintenance and enhancement of standards of facilities and services hired out or made available to tourists. SAT therefore competes in a fiercely competitive global environment to attract tourists to South Africa .

In terms of funding, SAT is involved in a joint operation with the private sector partner, Tourism Business Council of South Africa (TBCSA). The objective of the joint operation is to market SA in certain markets identified through research. Funds contributed into this fund are used for marketing activities. Given the limited resources, SAT has adopted and rolled out a Tourism Marketing Growth Strategy based on in-depth segmentation research and focus groups conducted around the world. The strategy focuses its marketing activities on specific segments of tourists in particular markets:

v That are most likely to come to South Africa ; and

v Whose value for South Africa will be the highest taking into consideration the size of the segment.

4.1 Performance environment

As at the end of November 2011, growth was at 2.7%, taking the impact of the 2010 FIFA Soccer World Cup into consideration the growth rose to 7%. The idea is linking the work of the SAT to government’s key priorities. The five priorities have been converted into government’s Medium Term Strategic Framework.

4.2 National Tourism Sector Strategy targets

v Arrivals – one of the aims was to have 15 million foreign arrivals by 2020.

v Domestic tourists expected to grow by 3.4 million from 14.6 million in 2009 to 18 million by 2020 and total trips to grow from 30 million to 54 million, with holiday trips increasing by 5 million.

v Gross Domestic Product (GDP) – expected to increase tourisms contribution to the GDP from an estimated R189.4 billion in 2009 to R499 billion by 2020.

v Job creation – the tourism sector is committed to consolidating its efforts to create jobs and aims to create 225 000 jobs by 2020 – 177 000 in the tourism sector and 48 000through direct government investment.

4.2 Markets classification

SA Tourism with its 16 business units sells South Africa in the following markets:

v Core markets: Markets which present the greatest opportunity. These markets are very attractive and have easier access from a tourism marketing point of view, deliver the “bread & butter” in terms of tourism for South Africa and approximately 60% of organisation’s efforts (in terms of human capital and budget) is deployed in these markets. These markets are Botswana , Kenya , Nigeria , USA , UK , Australia , India , France , Germany , the Netherlands and the domestic South African market.

v Investment markets: Markets where some investment is made for returns in future. These are also very attractive, but more difficult to access from a tourism marketing point of view. Given the potential of these markets, it is of great importance for SA Tourism to invest in these markets, ahead of future returns. Approximately 20% of the organisation’s efforts (in terms of human capital and budget) is deployed in these markets. These markets are Angola , Democratic Republic of Congo, Mozambique , Zimbabwe , Canada , China (including Hong Kong), Japan , Italy , and Sweden .

v Tactical markets: Markets that should be considered for specific, tactical opportunities. These markets are less attractive, but very easy to access from a tourism marketing point of view. Approximately 15% of the organisation’s effort (in terms of human capital and budget) is deployed in these markets. These markets are Ghana , Swaziland , Tanzania , Lesotho , Singapore , Ireland and Switzerland .

v Watch–list markets: These markets are less attractive and more difficult to do from a tourism marketing point of view. However, limited exploratory marketing, largely in conjunction with South Africa ’s overseas missions and tour operators, is to be undertaken by South African Tourism in these markets as they might grow into future, more prominent markets for South Africa from a tourism point of view. Approximately 5% of the organisations effort (in terms of human capital and budget) is deployed against these markets. These markets are Egypt , Namibia , United Arab Emirates , Brazil , Malaysia , New Zealand , Republic of Korea , Austria , Belgium , Denmark , Norway and Spain .

SAT promotes South Arica generically in terms of its unique selling points as an all-season, year-round preferred tourist destination, utilising marketing initiatives that are guided by the Tourism Growth Strategy. The strategy incorporates three key market portfolios namely:

v Africa and Domestic;

v Americas , Asia and Australasia ;

v Europe and the United Kingdom .

4.3 Importance of Africa to meet NTSS targets

v Africa delivers the highest number of tourist arrivals : Africa delivers more than 70% of all arrivals every year. Tourist arrivals from Africa grew at 10.3% annually from 2003 to 2010. Africa’s contribution to the total tourist arrivals to South Africa increased from 68.1 in 2003 to 77% in 2010.

v Africa is growing: Africa witnessed a remarkable growth in GDP and GDP per capita (18.9% and 16.3%, respectively) from 2003-2008. Tourist arrivals from Africa to South Africa increased at a much faster rate of 10.3%, compared to the growth of 3.3% in tourist arrivals from the rest of the world, during 2003 -2010. The value that Africa brings to the South African economy goes beyond tourism (i.e hotels and attractions), and has major benefits for the whole economy (especially in manufacturing and other downstream industries).

v Africa is accessible: Africa is South Africa ’s natural hinterland. Accessibility of South Africa to a significant number of travellers, particularly those in Southern African countries, and their familiarity with the country, are the major benefits. South Africa captures more than 50% of the total outbound departures from African countries.

v Africa still represents untapped potential: South Africa has the potential to further exploit its proximity and strength as a choice destination in the African market, which is still emerging from purpose-based travel into a true leisure-driven tourism market. South Africa receives a relatively small number of travellers from countries other than African countries, which implies that there is tremendous opportunity for growth.

4.3 SA Tourism strategies to deliver on the outcome

v Invest only in selected markets to deliver volume and value.

v Convince consumers that South Africa can be trusted to deliver memorable experiences.

v Engage Stakeholders to deliver quality visitor experience that re-affirm the brand promise.

v Work the distribution channel to promote South Africa ; and

v Energise and empower the organisation to innovate and achieve excellence.

4.4 South African Tourism’s six strategic orientated goals

To market South Africa in such way that:

v Annual arrivals to South Africa increase to 12 million by 2015 and 15 million by 2020 while the number of domestic tourists per annum should increase to 16 million by 2015 and 18 million by 2020.

v Increase the average spend per arrival in South Africa from R11,960 to R12,536 per person by 2012/13 financial year.

v Become the most preferred Tourism Brand by obtaining an average positive brand awareness percentage of 79% in all the markets where Brand Tracking is done.

v To deliver on the quality experience expected by the international and domestic tourist by having at 6 172 graded tourism products in South Africa by 31 March 2013.

v To continuously improve internal policies, procedures and business processes so that it supports the spending of no less than 98% or no more than 102% of its consolidated annual approved budget as well as the achievement of clean annual audit reports; and

v To grow South Africa ’s business events industry, continuously improve the culture within the organisation by living the SAT values and thereby reduce its average annual staff turnover rate to no more than 10% while achieving an average score of at least 3.3 in the Deloitte Best-Company to Work for survey.

4.5 MTEF allocation to aggressively grow Africa

Objectives to drive growth from the continent to meet NTSS targets:

v Increasing regional awareness of South Africa as a tourism and leisure destination.

v Increase arrivals and spend from Africa to contribute to DGP and job creation.

v In SADC, South African market penetration is high but opportunities exist to promote repeat travel and to turn shoppers into holiday travel.

v In Africa Air markets, sizeable opportunity exists to attract high value business and leisure traveller.

v Setting up five marketing offices in key African markets by 2020; and

v Implementation of regional tourism programmes.

4.6 Air markets

Limited marketing activities are also undertaken around key international airline hubs given the available airlift from such markets to South Africa or markets where South Africa has a national strategic interest. These hubs are Ethiopia , Zambia , Senegal , Argentina , Thailand , Greece , Bahrain , Oman , Qatar and Saudi Arabia .

In addition to developing each market individually, SA Tourism would look at growing arrivals in key regional markets using a hub strategy:

v East African Regional Strategy: Large regional market potential suggests the need to establish presence in the market rapidly by building key relationships to be leveraged for winning in these markets. For example, Kenya is a relatively small market on a standalone basis, with only 32 000 arrivals in 2010. Serving additional EAC countries, such as Uganda and Tanzania would be beneficial.

v West African Quick Win Strategy: The strategy will include showing in the short term, presence in Ghana by developing critical trade and media partnerships and making very targeted investments in the market. The Nigerian market is large and fast growing market. Serving Ghana adds 20 000 arrivals to the Nigerian market. Combined arrivals from Ghana and Nigeria represent 81% of ECOWAS’s arrivals or 70 000 arrivals.

v Central African Spill-over Effect: Limited additional effort is required in the short to medium term as effects will automatically spill over with no additional effort. For example, the DRC market remains an investment market with its high tourism potential warrants increased investment. Due to the proximity and high connectivity between the DRC and Congo-Brazaville, any activities in the DRC will have spill-over effects into Congo-Brazaville.

5. KEY ISSUES FOR THE COMMITTEE

The committee welcomed the proposed budget allocations and medium term strategic frameworks as presented. The committee raised the following key issues:

5.1 Rural tourism development remains a challenge. Government departments should tailor responses to this challenge in terms of programmes and budgets to address disparities and in an enjoined programme to optimise actions that would cushion the vulnerable.

5.2 To ensure that the current EPWP Programmes are sustainable by closely monitoring and evaluating these projects – to assist in addressing concerns raised by the Auditor General in the 2010/11 financial year; including the difficulties of obtaining information specifically the statistics on the number of jobs created and the effectiveness or impact of the EPWP projects run by Department of Tourism on behalf of the communities.

5.3 To obtain details with regards to the R12 million to be spent on consultants for the support of the Department’s internal audit unit; the R3.9 million to be used on advisory services and R8.6 million to be used on the development of a visitor information centre and national tourism information gateway space planning through the MTEF period. Further R5 million to be spent on consultants in the MTEF period.

5.4 To ensure that there is no overlap of roles where the marketing of tourism locally and internationally is concerned.

5.5 To monitor the support the different enterprises receive from the Department and how many of these enterprises actually yield positive results from this support.

5.6 Refocus on heritage and cultural heritage projects – there was a greater need for investment towards cultural and heritage tourism. Heritage and cultural sites should be kept at an acceptable tourism level. The refocus on such sites would benefit poor rural communities.

5.7 Cost drivers in aviation sector that affect consumer behaviour and travel patterns. These cost drivers include global exchange rate and currency volatility, oil prices, fuel costs and costs associated with increased transport security plus landing fees.

6 RECOMMENDATIONS

Having considered the budget and medium term strategic frameworks of the Department and SA Tourism, the committee recommends that:

6.1 Public-Private Partnerships (PPP’s) : The Department should double its efforts by ensuring that the notion of private-public partnerships is a well endorsed practice for building capacity to delivery in the tourism and hospitality sectors.

6.2 Small, Medium and Micro Enterprises (SMMEs) : All spheres of government should work towards strengthening competitiveness and promotion of SMMEs and cooperatives as they remain the cornerstone for growth of the economy and creation of work opportunities within the tourism and hospitality sectors.

6.3 The Government aught to facilitate market access and entry into the value chain by small businesses and cooperatives and reduce regulatory burden on small businesses.

6.4 Local Government: The local sphere of government is an important contributor to the success of tourism activities in terms of community driven tourism philosophy. The efforts should be coordinated within the provincial tourism growth strategy.

6.5 Job creation at local level: tourism is a demand-driven sector. Therefore the volume and value of demand inform investment in supply and job creation. Provision of public infrastructure supporting local economic development is improved. This will assist municipalities to focus Local Economic Development initiatives that are skills creating, employment generating and domestic production and consumption promoting.

6.6 Signage and road infrastructure : poor road signage and infrastructure impact negatively on access to tourism products, especially in rural areas. The cooperative work between the Department of Tourism and the Department of Transport to be intensified.

6.7 Use of graded establishments : In order to encourage SMMEs and other tourism enterprises to register their businesses in terms of the new grading system, the use of graded establishments by governments departments is encouraged or the Cabinet directive of 2006 would need to be enforced.

6.8 Tourism budget : while the committee notes the competing needs, obligations and challenges facing the government, the committee maintains the budget is not adequate, and does not compare favourably with the budgets of South Africa ’s major competitors.

6.9 Tourism information : Public education, awareness and information dissemination should be linked to outreach initiatives of the Department.

6.10 Synergic linkages should be developed and harnessed at all spheres of government so as to promote local tourism activities and strategic partnerships.

6.11 Flexible visa requirements : Department of Tourism, Department of Home Affair and Department of International Relations and Co-operation to implement their memorandum of understanding (MoU) to ensure that tourists and investors were not turned away because of stringent visa requirements or because it takes too long to obtain a South African visa, whilst still ensuring that national security is not compromised.

6.12 Transformation of the tourism sector : There should greater action taken to support and implement Broad-Based Black Economic Empowerment (BBBEE) as well as procurement policy implemented to achieve the BBEEE imperatives of government.

6.13 Air Lift Strategy: Aligning air transport with other national strategies through the common criteria of the national interest through interdepartmental participation with regards to National Foreign Policy, National Trade and Industry Strategy as well as general infrastructure requirements of South Africa . Reduced total cost of travel to South Africa should be the central focus of the strategy.

6.14 Memorandum of Understanding (MoU): The Department of Tourism to present to the committee a comprehensive reports on the memorandum of understandings signed first with key sister departments to support tourism development and growth and secondly, with countries where South Africa has a strategic interests for purposes of oversight.

6.15 Skills Development : while the committee acknowledges the initiatives taken by the department to engage five universities in the country to develop skills and capacity the industry, there is also a need to support FET colleges and Sector Education and Training Authorities to be linked to business, industry and other advanced education and training programmes.

6.16 2010 FIFA Soccer World Cup Legacy : the department to present its blue print on benefits in real terms of the World Cup and how the country has capitalised on the event.

6.17 Landing Fees : The Department of Tourism to engage the Department of Transport and Airport Company of South Africa to deal with the issue of high landing costs. The engagement should ultimately enhance the prospects for South Africa as a preferred air travel destination.

6.18 Implementation of infrastructure development : Parliament should prioritise overseeing the implementation of infrastructure development aligned to rural communities and also ascertain support facilities in rural areas for tourism sector.

6.19 Extended Public Works Programme: There should be greater focus on monitoring the outputs and outcomes of Extended Public Work Programmes as it holds potential for poverty relief and providing first level skills and opportunity for productive citizenry.

7 APPRECIATION

The Committee would like to extend special appreciation to the Ministry, the Director General, programme managers and heads of entities for cooperation throughout the last financial year.

8. CONCLUSION

Having considered the strategic frameworks of the Department of Tourism and South African Tourism for the next five years and budget allocation for 2012/13 financial year, the committee recommends the House endorse the report.

Report to be considered.