ATC121024: Budgetary Review and Recommendations Report of the Portfolio Committee on Tourism on the Performance of the Department of Tourism for the 2011/12 Financial Year, dated 23 October 2012


Budgetary Review and Recommendations Report of the Portfolio Committee on Tourism on the Performance of the Department of Tourism for the 2011/12 Financial Year, Dated 23 October 2012

Budgetary Review and Recommendations Report of the Portfolio Committee on Tourism on the Performance of the Department of Tourism for the 2011/12 Financial Year, Dated 23 October 2012

The Committee, having assessed the service delivery performance by reviewing the Annual Report and the Financial Statements of the Department of Tourism under Budget Vote 35 reports as follows:

1. Introduction

The Annual Report and Financial Statements are considered against the backdrop of the prevailing legislations and the global tourism trends that somehow inform and influence attainment of set targets for both the National Department of Tourism and its entity, South African Tourism. Some of these major global trends include an increasing demand for short haul instead of long haul travel, reduced length of stay by tourists, recession in Europe, decline in disposable income, and fragile recovery of the American economy linked to Europe . According to Schedule 4 of the Constitution, tourism is a concurrent function that cuts across the three spheres of government. The performance of the National Department of Tourism also depends on other departments in addressing tourism related issues. Despite the aforementioned international challenges and the cross-cutting nature of tourism, the National Department of Tourism has made significant progress in developing the strategies and plans that promote tourism as one of the six economic pillars of the Economy in South Africa . Having developed the National Tourism Sector Strategy (NTSS), the Department focussed on its implementation in the 2011/12 financial year. This saw the Department delivering on a number of key objectives relating to product development, service excellence, responsible tourism and skills development. The department also intensified its research agenda and partnered with institutions of higher learning in commissioning research studies

The Department has recorded 8.3 million tourist arrivals in 2011 against 8.1 million in 2010. This indicates that the Department has managed to leverage on the gains made by hosting of the 2010 FIFA World Cup and consolidated its efforts in attracting more tourists to the country. The Department has also developed communication initiatives with South Africans as well to reach out to the citizenry and raise awareness of the opportunities of the tourism sector and to make them travel as domestic tourists within their own country. In achieving domestic tourism, the Department has recognised the importance of local government in the implementation of strategies and achieving synergy across three spheres of government. A Local Government Support Programme and Growth Support Programmes were developed and a National Stakeholder Forum has been established to improve integration and alignment.

The system of monitoring compliance with BEE rating was piloted and is now operational to ensure transformation of the tourism industry and compliance with the tourism BBBEE Charter. To support the participation of Small Medium and Micro Enterprises, the Department initiated and piloted a mentorship programme in which enterprises are mentored by retired business executives. In addition, the department conducted nationwide workshops for Supply Chain Management officials, as well as public and private sector tourism associations on the implementation and alignment of BBBEE and Preferential Procurement Framework Act to advance transformation of the tourism sector.

This report seeks to provide an analysis of the annual report of the Department of Tourism for the 2011/2012 financial year. The emphasis of this report will be based mostly on programme performance in comparison with the Strategic Plan in line with the 2011/2012 budget. The committee, in reviewing the work of the Department for the financial year under review placed emphasis on the following aspects:

Ø An overview of the overall performance of voted funds: Budget Vote 35: Tourism;

Ø An overview and analysis of the department’s strategic priorities and measurable objectives;

Ø Analysis of the department’s prevailing strategic and operational plan; and

Ø Analysis of the department’s annual report and financial statements using section 32 reports as a guide.

The committee, in undertaking this process used a number of source documents ranging from the State of the Nation Address, strategic plans of the department, briefing sessions as well as oversight visits as a base to analyse the work of the department.

1.1 The role of the Committee

The mandate of the committee is underpinned by provisions of the Constitution of the Republic of South Africa , 1996, Parliament’s vision and mission and the rules of Parliament.

The mandate and role of the committee is to:

Ø Consider all matters falling within its portfolio as referred to it in terms of the Constitution, legislation, Rules of the Assembly or by resolution of the Assembly.

Ø Exercise and maintain oversight over the executive state organs falling within its portfolio.

Ø Monitor, investigate, enquire and make recommendations concerning any executive organ of state or institution.

Ø Perform any other responsibilities assigned to the committee in terms of the Constitution, legislation, Rules, resolution of the Assembly, including functions concerning parliamentary oversight of the executive organs of state or institutions.

1.2 National Department of Tourism

The mandate and core business of the department is underpinned by the Constitution and all other relevant legislation and policies applicable to the government, including Batho Pele and the White Paper on Development and Promotion of Tourism in South Africa . Part A of Schedule 4 of the Constitution of the Republic of South Africa , 1996, lists tourism as a concurrent national and provincial legislative competence. The Tourism Act, 1993 (Act No 72 of 1993) as amended, makes provision for the promotion of tourism in the Republic and for further regulation and rationalisation of the tourism industry; measures aimed at the maintenance and enhancement of the standards of facilities and services hired out or made available to tourists; and the co-ordination and rationalisation, as far as practicable, of activities of persons who are involved in the tourism industry.

The vision “to be globally celebrated as a leader in tourism excellence” and mission “collectively and boldly promoting responsible and sustainable tourism for the benefit of all South Africans” therefore embody the mandate of the department, as follows:

Ø The department supports tourism sector’s contribution to economic growth.

Ø Its mandate is to create the conditions for sustainable tourism growth and development, through government’s new growth path and the National Tourism Sector Strategy which focus on job creation and economic growth, the department supports both the public and private sectors in the tourism industry.

2. Strategic Priorities and Measurable Objectives of the Department

The aim of the department is to promote and support growth and development of an equitable, competitive and sustainable tourism sector, enhancing its contribution to national priorities.

2.1 Strategic Plan of the Department

Key sector for economic growth and job creation: Government’s New Growth Path identifies tourism as one of the six economic sectors of economy and asserts tourism as a driver of both domestic consumer spending and foreign exchange earnings. The tourism is a key labour-intensive sector and strategic area of the economy, with low barriers to entry for entrepreneurs, and has the potential to create jobs in both urban and rural areas and stimulate growth. It is estimated that for every 16 tourists, a job is created in the sector. The National Tourism Sector Strategy forecasts that tourism is set to contribute 225 000 new jobs by 2020.

In the medium term the department aims to:

Ø Increase investment in the tourism sector.

Ø Increase inbound tourism.

Ø Deliver a world-class visitor experience.

Ø Entrench a culture of tourism amongst South Africans; and

Ø Increase the sector’s contribution to job creation and economic growth.

2.2 Measurable Objectives of the Department

In line with the vision of the National Department of Tourism, and in alignment with the national priorities, the Department identified projects that would accelerate delivery of services in the tourism sector. Outlined below are the strategic objectives of the Department as stated in the 2011/2012 Strategic Plan. [1]

Ø To grow the travel and tourism sector’s absolute contribution to GDP;

Ø To achieve transformation within the travel and tourism sector;

Ø To provide excellent people development and decent work within the travel and tourism sector;

Ø To entrench a culture of travel amongst South Africans;

Ø To deliver a world class visitor experience; and

Ø To address the issue of geographic, seasonal and rural spread.

The objectives mentioned above are in line with the international trends and also address domestic tourism issues. The major international trend is to develop and drive domestic tourism, and to achieve this, the Department needs to intensify interventions that will entrench the culture of travel amongst South Africans, especially historically disadvantaged and rural communities located near major tourist attractions. These interventions will strengthen the role of tourism in supporting rural development and ensure diversification of product offering. The local government support programme will need to be intensified and cover many district municipalities to ensure capacity to plan and deliver on tourism mandate at a local level. In the same vein, the Department needs to intensify mechanisms geared towards ensuring equitable geographical spread of tourism development and measures that address the seasonal nature of the industry.

The tourism industry remains mainly untransformed and the pace of transformation is very slow. The department needs to intensify interventions aimed at implementing the Tourism Sector Codes and monitoring compliance by role-players in the industry. There needs to be a concerted effort to assist emerging tourism enterprises so that they may graduate from the second to the first economy of the tourism industry. All the interventions mentioned above will culminate in the increased contribution of the tourism sector to the Gross Domestic Product growth and realisation of job creation as envisaged in the current economic policy of the Republic of South Africa .

3. Analysis of the Strategic and Prevailing Operational Plan of the Department’s

The following provides a breakdown per programme on key performance indicators, targets and actual performance:

3.1 Programme 1: Administration

The purpose of this programme is to provide strategic leadership, centralised administration, corporate support and services. In terms of good corporate and corporative governance, the department set a target of 100% and was able to implement 100% of organisational performance management system. The internal protocol was developed with a target of 100% and 100% was implemented to achieve intergovernmental policy implementation. With regard to reduce the funded vacancy rate a target of 10% was set and 9.42% was achieved.

A target of 100% was set for implementation of the Workplace Skills Plan and 118% was achieved, which was higher than a set target. The department set a target 100% target for the implementation of Performance Management System and 100% achievement was recorded. With regard to efficient service delivery, the department set a target of 97% for uptime of network and services availability and achieved 99%, which was higher than the set target.

There was no baseline for the implementation of the Master Systems Plan (MSP) and the department was able to review the MSP and implement 100% of phase 1. There was also no baseline for Business Process Modelling and Structures but the department was able to audit all the business processes and model 45% of business processes higher than the 40% that was originally set as target. With regard to effective internal audit services a target of 100% was set and achieved by the Department.

Regarding economic, efficient and effective use of departmental resources a target of 90% was set for compliance with regulatory requirements and 100% was achieved higher than a set target, whilst a target of 59 % was set for expenditure on procurement from BBBEE and BEE enterprises and 59% was achieved per set target.

3.2 Programme 2: Tourism Development

The purpose of this programme is to facilitate and support the development of an equitable tourism sector. With regards to the creation of employment opportunities by implementing tourism projects targeted at the unemployed, the number of full time equivalent jobs created was targeted at 5 270 and the actual number created was 5 036. With regard to the number of Full Time Equivalent jobs created from the Medium Term Expenditure Framework Baseline budget for the Tourism Enterprise Partnership (TEP) a target was set at 5 000, while the actual jobs created were 5 093. With regard to contribution to skills and people development within the tourism sector a target of 800 was set for the number of unemployed youth and graduates trained as chefs and placed for experiential learning, whilst a number of 818 youth were enrolled in the programme with 536 who graduated. The total of 282 candidates dropped out due to reasons beyond the control of the department which includes pregnancy, getting permanent employment and others.

In terms of training unemployed youth in the hospitality field and placing them for experiential learning a target of 300 was set, whilst an actual number of 422 youth were trained and placed exceeding the target by 122 youth. With regard to people trained as Tourist Buddies/ Tourism ambassadors and placed for experiential learning a target of 975 was set whilst a total of 1 221 were enrolled and 1 170 of them placed for experiential learning, and 913 assessed and found competent and will be receiving certificates. The committee notes department performed well on training programmes including those funded through the EPWP funding the department must intensify the “soft” projects that deal with skills training whilst sorting out the technical challenges presented by capital projects.

In terms of facilitating and supporting economic empowerment through product and enterprise development there was no baseline and the department targeted to develop a Rural Development Strategy and support 2 rural products, whilst the Rural Tourism Strategy was developed and finalised and 4 products were supported, 2 more than the target. The department had money to fund development of feasibility studies and supporting 4 projects and the original target of 2 targets might have been an underestimation which resulted to department seemingly achieving higher performance on the set targets. With regard to tourism projects funded through the EPWP funding a target of 45 was set, whilst an actual number of 76 projects were implemented. Here the committee notes that the department exceeded the target by 31 projects and encourages the department to set targets according to the available budget and do proper project costing before setting the target than to declare overachievement which might have been achieved within the available budget.

With regards to investment promotion activities there was no baseline and a target of 4 investment promotion activities was set, whilst a total of 4 were achieved. In regard to intensifying domestic tourism development the Cultural Heritage Tourism Strategy, Events Strategy, and Niche Tourism Strategy were developed and the Social Tourism concept document was finalised. With regard to small rural tourism enterprises supported a target of 530 was set, whilst 981 were supported given that 2012 was the first year in which rural enterprises were supported and the 530 was an estimate at the beginning of the year.

With regards to number of enterprises supported to grow either at 5% revenue or 5% jobs, a baseline of 19 was available and a target of 25 including 5 from rural areas was set, whilst a total of 99 was achieved due to the mentorship programme that was included for all enterprises supported to enable them to grow. A target of businesses supported with market access was set at 170 whilst 186 was achieved. With regard to members of designated groups supported, a target was set at 3 351 whilst a total of 2 253 were supported as per advise of the department to TEP to count enterprises rather than individuals as had been the case previously.

To enable and drive transformation in the sector as informed by the gazetted tourism BEE Charter and NTSS, a target of 12 MoUs was set to be signed with strategic partners, whilst 14 were signed, 5 with public sector and 9 with private sector. A target of 30 was set for organs of state who report on leavers they use to drive transformation in the sector, whilst 30 submitted their reports. With regard to mentorship programme established to support development of Black SMMEs a target of 20 was set, whilst a total of 22 were accepted in the AMSCO programme. A target of 50 was set for Black graduates participating in the accelerated tourism graduate apprenticeship, whilst only 37 graduates participated in the programme, reasons being the delays in the negotiations with relevant institutions to host graduates. The committee notes that the department sets targets before finalising placement negotiations and urges the department to finalise negotiations and be certain with number of available spaces for placement before targets are set.

In ensuring key stakeholder engagements through strategic events platform, a target of 5 events was set based on the baseline of 1, whilst 5 events were successfully executed as per set target. A target was set to publish an Annual Report on the impact of public sector partner spend on empowered tourism goods and services, whilst 1 report was compiled as per set target.

3.3 Programme 3: Tourism Growth

The purpose of this programme is to promote growth, competitiveness and quality of the tourism sector. To provide excellent people development within the tourism sector targeting young people, a target was set to revise the skills report for 2012 and MoU has been signed between CATHSSETA and the department. As part of ensuring that unemployed Matriculants and tourism graduates are trained and placed for experiential learning per year in the hospitality industry a target of 70 was set, whilst 249 were recruited, trained and placed as more funding was allocated from EPWP for this initiative. A target of 176 was set for youth trained as chefs, whilst 818 trained is the same as that accounted for under Tourism Programme. The committee notes this as double counting and urges the department to place target under the Programmes where they are most relevant. A target of 4 National Tourism Leadership Dialogues was set and all 4 were achieved. A target of hosting a National Careers Expo was set, whilst an Expo was successfully held in Durban . With regard to higher education institutions engaged to provide professional training for scarce and critical skills for tourism, a discussion document was developed on areas of co-operation and a consolidated report generated. With regard to creating a conducive environment and contributing to economic growth through decent work a draft framework for decent work was developed as planned.

In improving service levels in the tourism industry, Tourism Generic Service Excellence Requirements Norms and Standards were facilitated as planned. With regard to implementation of Service Excellence Strategy, the strategy was implemented and norms and standards launched as planned. With regard to professionalizing tourist guides services, 9 workshops were planned and 11 implemented, 4 SADC countries were targeted for consultation on harmonizing guiding standards and all 4 SADC countries were consulted and a draft framework for harmonizing guiding standards developed, and a monitoring and reporting of provincial tourist guides registration was done as planned. With regard to improving service levels in the tourism industry a target of developing a Consumer Satisfaction Framework and communicating it to the industry was set and achieved.

To promote responsible tourism best practices, targets of developing the accreditation system and Minimum Standards for Responsible tourism; development of Universal Access in Tourism action plan; developing the National Climate Change and Tourism Response Programme; and developing National Responsible Tourism Strategy were set, whilst the accreditation system was approved by SANAS, Universal Accessibility action plan finalised with annual action plan and 18 workshops conducted with 4 400 brochures distributed; the National Climate Change and Action Plan developed with 18 workshops and 5 000 brochures distributed; and National Responsible Tourism Strategy including annual action plan was developed.

3.4 Programme 4: Policy, Research, Monitoring and Evaluation

The purpose of this programme is sector policy development, research, planning, monitoring and evaluation. It is meant to ensure that the tourism policy environment is conducive to sustainable growth and development. To ensure monitoring and evaluation of the tourism sector performance, a target of 1 was set for the frequency of the State of Tourism Report and the target was achieved. A target of 2 was set for the number of impact evaluation reports for tourism sector and departmental initiatives, whilst 1 SRI report was finalised and printed and 1 impact survey to evaluate TEP is in the process of being developed.

The target was set to have a Draft M&E Framework for NTSS and a draft monitoring and evaluation framework for the National Tourism Sector Strategy (NTSS) had been finalised. With regard to progress reports on tourism indicators for Presidential outcomes a target had been set to develop quarterly reports based on Presidential timeframes and all quarterly reports were done as per requests received.

In terms of tourism forecasting models customized and adopted a target of 1 was set 1 model to estimate number of direct and indirect jobs created was developed. With regard to M&E framework for Departmental entities a target was set to develop an M&E Framework with 1 Monitoring and Evaluation Framework for Tourism Enterprise Partnership developed.

In terms of creating an enabling policy environment and improve intergovernmental coordination, a target of 5 tourism related policies and strategies was set. 5 documents were produced, namely Draft Domestic Tourism Strategy, Crisis Management Framework, Intergovernmental and Stakeholder Engagement Framework, Sector Budget Structure, and two policy papers on transport review and compendium of legislation with impact on tourism. With regard to district municipalities supported to implement tourism development and growth strategies a target of 2 municipalities was set, whilst a Local Government Tourism Development and Growth Support Programme was developed and 2 district municipalities supported. In terms of reports on the integration and alignment of tourism initiatives with NTSS at provincial government level, a target of a report on the alignment with provincial growth and development strategies and NTSS was set and achieved. With regard to district municipalities influenced to align tourism initiatives with the NTSS a target of 15 was set and actual number of 19 was achieved. The Department had planned 2 platforms to report on the implementation of the Airlift Strategy, whilst 5 platforms were facilitated to secure additional frequencies in key tourism markets in Botswana , Singapore , China , Swaziland and Hong Kong . A target of 2 initiatives and platforms aimed at integration & alignment was set, whilst 2 National Stakeholder Forums were hosted to improve integration and alignment.

With regard to providing knowledge management for the tourism sector a target of 1 information and knowledge management system was planned and achieved; a national visitor information framework was planned and developed; a framework tourism information gateways framework and brand was planned and developed. A target of having an approved knowledge management framework and its implementation was set and the framework was approved and implemented. A target of 1 social media platform was set and 1 social media approach for the social media strategy was developed. With regard to district municipalities whose events are captured in the national events calendar a target of 50% was set, whilst 78% was achieved.

In terms of managing and conducting tourism research to inform tourism growth and development a target of 2 was set, whilst 2 was achieved as planned; and 2 research studies were targeted to be initiated to inform development of new markets, whilst 1 report was completed. A target of 3 research studies on tourism indicators identified in the NTSS without baseline was set and 3 studies were conducted. The development of the research framework with its implementation was planned and the national research framework was approved and its implementation commenced.

4. Analysis of Section 32 Expenditure Reports

At the end of the 2011/12 financial year, the department spent R1 250 264 billion of the total budget of R1 264 985 billion which amounts to 98.8 per cent of the total expenditure. The Department under-spent by R14.7 million which amounts to 1.2% of the allocated budget. The Departmental budget was increased by R22 million during the adjusted Estimates of National Expenditure².

Economic classification spending trends

Current Payments: The department spent R262 million or 2% of total budget allocation.

Transfers and subsidies: At the end of the 2011/12 financial year, the department transferred R966 731 million or 77% of total budget allocation.

Capital Assets: The Department spent R20 519 million on capital assets or 2% of the total budget allocation in the 2011/12 financial year.

A breakdown of the spending trends for each of the programmes reflects the following:

² Expenditure Report 2011/12

4.1 Programme 1: Administration

The allocated budget for this programme was R 197 837 million. An amount of R 196 513 million was spent in this programme which amounts to 99 .3% per cent of the total allocation. The slow spending is due to unspent funds relating to furniture and equipment for the new Departmental head office building (R 1 324 million).

4.2 Programme 2: Tourism Development

The allocated budget for this programme was R346 175 million. Spending amounts to R338 577 million which is 97.8% of allocated budget. The slow spending (R7 598 million) was due to Tourism product and Enterprise Development’s heritage DVD project (tender cancelled) and memorandum of Understanding which were not finalised for the Tourism Sector Transformation’s learnership support programme with Further Education and Training Colleges (FETs).

4.3 Programme 3: Tourism Growth

The allocated budget for this programme was R694 074 million. The R689 756 million amounting to 99.4% of the appropriated budget for this programme was spent. The under spending (R4 318 million) is due to outstanding invoices for membership fees payable to International Airport Association (IATA). The underspending on transfers was due to the memorandum of Understanding with Tourism Business Council not finalised during the financial year.

4.4 Programme 4: Policy, Research, Monitoring and Evaluation

The total allocation for this programme was R26 899 million. The R25 400 million of the budget amounting to 94.4% was spent. The underspending is due the memorandum of Understanding with the Stellenbosch University to develop a long term scenario that will guide the tactical implementation of the National Tourism Sector Strategy (NTSS).

5. Analysis of the Department’s Annual Report and Financial Statements³

In the outcomes approach to service delivery, tourism contributes to the realisation of outcome 4 (decent employment through inclusive economy), and outcome 7 (vibrant, equitable and sustainable communities and food security for all). In addressing these outcomes, the committee acknowledges the strides made by the Department in 2011/12 financial year in consolidating the tourism sector efforts to increase tourism’s contribution to job creation and economic growth. A number of policy frameworks have been developed and launched. Domestic tourism is now receiving the attention that supports its stature as the backbone for a sustainable tourism sector in South Africa but more still needs to be done to develop domestic tourism optimally. There is focus on transforming the tourism industry and ensuring inclusive tourism development. The Department has also intensified skills development with focus on youth training on scarce and critical skills within the tourism sector and 881 youth have been trained as Chefs.


³Annual Report and Financial Statements 2011/12

The committee is generally satisfied by the work of the Department and South African Tourism for the work achieved in the year under review which includes amongst others:

Ø Reduction of vacancy rate from 21.6% to 9.4% which has assisted the department in fulfilling its mandate.

Ø Establishment of a Risk Management Unit that assisted management in identifying and mitigating potential risks which could hinder achievement of set objectives.

Ø The Development of Rural Tourism Strategy, Tourism Development Master Plan, Cultural Heritage Tourism Strategy, Events Strategy, niche Tourism Strategy Decent Work Framework, Crisis Management Framework, intergovernmental and Stakeholder Engagement Framework, Tourism Sector Budget Structure, National Responsible Tourism Strategy, Minimum Standards for Responsible Tourism, Consumer Satisfaction Framework, Tourism Generic Service Excellence Norms and Standards which will enhance growth of the tourism industry.

Ø Training of 818 youth in a chef programme.

Ø The training of 1 221 people in Tourist Buddies Programme.

Ø Creation of 5 036 Full Time equivalent jobs created from EPWP and 5 093 Full Time Equivalent jobs created from MTEF budget (TEP).

Ø Foreign direct spend in rand terms has grown faster than arrivals, with an 11% per-annum growth rate.

Ø South Africa ’s tourism industry has managed to build on the momentum achieved during a record-breaking 2010 by growing a further 3,3% and attracting over 8,3 million international tourists in 2011.

Ø For the first few months of 2012, tourist arrivals to South Africa increased by an overall 10,5% year-on-year during the first quarter and overseas arrivals increased by nearly 18%. These statistics should be compared and understood within the context of global tourist arrival growth, which was at 5, 4% during the first four months of 2012.

Ø The domestic tourism statistics indicate that i n the first quarter of 2012, 5,5 million domestic trips were undertaken which contributed R5,2 billion to the economy. This is over R600 million or 13% more than last year’s economic contribution over the same period.

Ø Successful hosting of the National Tourism Careers Expo (NTCE) 2011.

Ø The latest Statistics SA’s accommodation figures indicated that total income for the accommodation sector for the second quarter of 2012 increased by 11,2%, and the number of stay unit nights sold for the second quarter of 2012 increased by 8,2%, both compared to the same period in 2011.

Ø President Jacob Zuma signed the United Nations World Tourism Organisation’s “Golden Book” at the World Economic Forum on Africa . This initiative was aimed at mobilising recognition and support for the tourism sector from world leaders by demonstrating travel and tourism’s crucial role in economic growth, job creation and development. The signing of the “Golden Book” took promotion of the growing South African tourism industry to new heights.

Ø Harmonising of tourist guiding standards with 4 SADC countries.

Ø Launching of the South African National Conventions Bureau Strategy.

Ø A total of 5 542 graded tourism establishments which is a 13% increase.

Ø The successful hosting of the Imvelo Awards and the Hospitality Investment Conference for Africa (HICA) was achieved in partnership with the Federated Hospitality Association of Southern Africa (FEDHASA) and the Tourism Business Council of South Africa (TBCSA) respectively.

Ø The successful hosting of the 2011 Indaba.

Whereas the Department has managed to register a number of successes they still have some challenges that must be addressed for the industry to realise its potential and these challenges include:

Ø The department failed to meet their target in relation to the implementation of the International Relations Strategy due to delays in finalising the Strategy within the set timeframes that would have informed the implementation programmes.

Ø The department experienced challenges with regard to grading of establishments due to a resistance by stakeholders. The Department needs to conduct more workshops and awareness campaigns to ensure that there is a buy-in to newly introduced grading standards.

Ø Opening of tourism offices in African markets to attract more tourists from these markets and ensuring regional growth.

Ø The continued challenge faced by the Department with regards to the implementation and monitoring of the Expanded Public Works Programme.

Ø Lack of technical expertise to implement the Expanded Public Works Programme.

Ø The Department experienced a huge number of dropouts in the training programmes and needs to improve recruitment and retention strategies.

Ø The Department and SAT struggled to achieve some planned targets and there is a need to improve in setting targets considering available baseline and external factors that may influence attainment of results.

Ø There is a need to improve financial and performance management at SAT with regard to controls and monitoring of Supply Chain Management (SCM) processes.

6. Consideration of Reports of Standing Committee on Public Accounts (SCOPA)

For the year under review, the department did not receive any invitation to appear before the Standing Committee on Public Accounts. The SCOPA prioritizes departments which received a qualified audit opinion or which had disclaimer or received an adverse audit opinion from the Auditor General.

7. Consideration of other Sources of Information

In compiling this report the committee considered other sources of information that that have a direct impact on the mandate of the Department, including:

Ø The State of the Nation Address

Ø Reports of the Auditor-General of South Africa (AGSA)

Ø Fact –Finding visits (Oversight) reports

Ø Prior BRRRs

Ø Reports of the Budget Votes

Ø Reports from organisations made presentations to the committee.

8. Committee’s observations

For the year under review, the committee interacted with a number of government departments, public entities and tourism industry stakeholders. In all these engagements, the committee made the following observations:

8.1 Political relations: The committee notes the increase in number of tourists from the BRIC countries. The committee is in support of the participation of South Africa in the BRIC countries partnership as this presents potential for the injection of direct foreign spend into the tourism industry. However, the department is yet to present a blue-print on how these political relations would be translated into economic benefits. However, the committee notes the delays in issuing visas to tourists from BRIC countries. Visa delays need improvement.

8.2 National gateways: The tourist experience begins by the time a tourist lands at the airport or is processed at a border gate. The level of customer care at border gates is somehow not friendly to tourists. The Department of Tourism has to work with the Department of Home Affairs and South African Revenue Services to devise mechanisms that could improve customer service at the major points of entry throughout the country.

8.3 Intergovernmental relations: The National Tourism Sector Strategy requires that all three spheres of government need to synergise their strategic plans as the Constitution defines tourism as a Schedule 4 competence. The Department must coordinate strategic planning sessions with all provinces to ensure synergy. The provinces should also have strategic planning sessions with municipalities to ensure seamless institutional support and seamless integration. The committee also notes the need of the Department of Tourism to enter into MoUs with other departments to address cross-cutting issues that affect tourism.

8.4 Tourism Budgets : The successful implementation of the National Tourism Sector Strategy and its related strategies and programmes require substantial financial resources. The current national and provincial Tourism Budgets are extremely limited and do not allow for the successful implementation of the National Tourism Sector Strategy. The Tourism Budget Structure has been finalised with the National Treasury and puts a huge financial burden on all spheres of government. There is a need to increase tourism budget to meet the mandate of the Department and provide necessary support to relevant role-players.

8.5 Marketing: The committee found that there is potential for growth in the African markets, however, there is inadequate marketing initiatives. The committee also found that regional tourism is the key to future tourism growth. It was also discovered that there is a new trend of a shift from a long haul to short haul travel and marketing interventions need to take these new trends into account.

8.6 Safety and Security of tourists: The committee observed that there are a number of violent strikes in the country; incidents such as the Hout Bay vessel drowning accident; and down rating of the country by the rating agencies. These may perpetuate negative perceptions of safety in South Africa and reduce the number of international arrivals.

8.7 Grading of tourism establishments: The committee observed that there is a challenge with regard to acceptance of new grading standards by the private sector in a form of resistance to embrace the new system. The matter is a threat to quality assurance in the tourism industry and must be addressed by all spheres of government. This also necessitates a closer look at the influence of the emerging social media on the grading and quality of products and experiences.

8.8 Public-private-partnerships (PPPs) : The committee recognises that the tourism industry is government led, private sector driven and community based. The development of the tourism industry will not only be facilitated by the government but need huge injection of investments from the private sector and development of strong partnerships. The National Treasury has the PPP Toolkit for Tourism and this needed to be unpacked and simplified to be effectively used as a tool for tourism development.

8.9 Indaba as premier African consumer show: The committee has observed that there is a challenge with the current venue used for Indaba and there is no long-term strategy to grow the event.

8.10 National Convention Bureau (NCB) – The committee notes the operation of the NCB in terms of the three phase strategy. The committee would however like to get a clear understanding of what have been the achievements of the NCB thus far and how its activities interface with the Provincial Convention Bureaus. The committee would therefore like to have a full briefing on the matter.

8.11 Tourism as an economic activity: The tourism industry is one of the foreign currency issues and is heavily affected by international economic climate. Tourism needs to be given special attention and its performance be closely monitored as this industry is the important foreign currency earner. The tourism industry must be viewed as an “export industry” serving as a mitigating factor to other distressed industries that act as foreign currency earners.

8.12 New cost drivers in aviation: The committee notes the effect of new cost drivers in aviation on consumer behaviour and travel patterns. These cost drivers included global exchange rate and currency volatility, oil prices, fuel hedging costs and costs associated with increased transport security. The committee also notes the concern the impact of high landing rates in growing the tourism industry.

8.13 SA Tourism levies – Provinces are of the view that the revenue from SA Tourism levies should be proportionally allocated to tourism routes so that it can be applied directly to the benefit of the province where it was generated. Stakeholders indicated willingness to pay the levy, but also wanted to receive a benefit from the fee payment.

8.14 Provincial statistics from SA Tourism – the lead time for obtaining statistics from SAT is too long and reduces the ability of tourism stakeholders to measure and manage the industry.

8.15 Unresolved Land Reform Claims – the prolonged land reform processes, linked to inadequate after care programmes in the wildlife and tourism business sector hampers investment opportunities in tourism.

8.16 Tourism Funds – in the form of Tourism Assistance Programme residing with the Department of Trade and Industry. These funds could assist the NDT to fund emerging businesses. The committee notes the engagements between the NDT and the DTI and would like have progress report on the matter.

9 Conclusion

The Committee has expressed satisfaction across the board that the Department and SA Tourism received unqualified audit reports with SA Tourism receiving 11 th consecutive unqualified no-matter-of-emphasis report.

During the presentation, the Committee was taken through programmes and policies aimed at increasing jobs and entrepreneurial opportunities in the tourism sector. The Department succeeded in creating 5 036 Full Time equivalent jobs and 5 093 Full Time Equivalent jobs created from MTEF from baseline budget. The Department also implemented the National Youth Chefs Training Programme on partnership with the South African Chefs Association. A total of 818 youth were enrolled in the programme and 536 graduated from the programme. In addition, 422 unemployed young people were trained and placed in various hospitality fields, 1 221 were enrolled and 1 170 placed for experiential learning as Tourist Buddies.

The Department has also succeeded in putting policies and strategies in place that will achieve seamless integration and grow the tourism the tourism industry. These policies and strategies have been aligned to the National Growth Plan. There have also been notable strides made with regard to transformation although the Department still needs to put more efforts in achieving a fully equitable and inclusive tourism industry.

The Department was able to spend 98% of its budget. The committee also interacted with the Auditor-General in assessing the performance of the Department as part of its oversight role.

The Committee further noted the progress made with regard to monitoring of EPWP projects and will be following up on progress with regard to the engineers that the department will be employing to ensure quality assurance and monitoring of capital projects. Although the department was planning to employ engineers to monitor the EPWP capital projects, the committee still noted with concern the non viability of EPWP capital projects after the department has exited the projects as EPWP funding does not cover operational costs.

10. Recommendations

10.1 Leadership

The committee notes with serious concern the continued lack of monitoring controls to comply with contractual requirements and internal controls over the Expanded Public Works Programme (Social Responsibility Implementation) to detect and prevent control deviations and non-compliance with laws. The value for money for some of the projects is also questionable. The committee notes the progress made by the Department in addressing the issues and recommends that the Department should have more stringent control measures in place to deal with this challenge and report progress to the committee.

10.2 Governance

The committee notes the existing concerns about the nature, extent and frequency of management’s assessment of controls in place, relating to the Expanded Public Works Programme, to prevent and detect fraudulent activities. The committee recommends that it be updated regularly on some of governance issues, particularly on EPWP projects and that there should be:

Ø Improvement in the reporting system to detect challenges at an early stage.

Ø An increased capacity and technical expertise to implement and monitor EPWP projects.

Ø Improved monitoring and evaluation of Expanded Public Works Programme

10.3 Investigations

The committee notes and is in support of the forensic investigations initiated by the Accounting Officer of the Department in respect of the EPWP projects and would follow the investigations with keen interest; and the criminal cases that have been opened with South African Police Service (SAPS) in respect of the EPWP projects.

10.4 Tourism Budget

The Budget of the Department of Tourism must be increased to meet the following:

Ø Create optimal level of advertising that would in turn ensure greater generation of jobs.

Ø Open Tourism offices and marketing hubs in African markets to have marketing presence and conduct activations in these emerging markets, as marketing intelligence indicates an increasing demand for short haul instead of long haul travel.

Ø Implement strategies that will enhance development of domestic tourism.

Ø Facilitate implementation of strategies and programmes that have been developed to achieve the objectives of the National tourism sector Strategy.

Ø To create more Full Time Equivalent jobs from the Expanded Public Works Programme, especially in rural areas.

Ø To assist the SMMEs in funding their businesses for start-up capital, staff training, and extension of existing tourism establishments.

10.5 Mitigating effects of administration costs

The committee acknowledges that tourism businesses as economic enterprises should pay taxes and utility costs according to the laws of the country. However, the committee notes with concern the effect of utility costs to tourism enterprises, especially emerging businesses. The committee recommends that:

Ø The South African Local Government Association (SALGA) needs to be engaged to ensure that municipalities charge rates and taxes that take into account the volatility of tourism businesses due to seasonality in order to ensure that emerging tourism businesses are sustainable.

Ø Municipalities should consider mechanisms of lowering electricity tariffs charged to tourism businesses as higher costs affect emerging enterprises.

Ø The Department should work with other public entities and the private sector to come up with sustainable alternative energy sources that could be used in the tourism industry to lower the costs of doing business.

10.6 Intergovernmental relations in tourism

There is fragmentation of tourism planning across the three spheres of government, inadequate database on the supply side, with associated lack of reliable market information and poor integration of tourism with other sectoral policies. Tourism is a concurrent competence, and requires good coordination and mutual support between the three spheres of government, particularly in view of the diverse nature of tourism.

The committee recommends that:

Ø An integrated approach should be established by the three spheres of government to enhance their relationship and coordination whereby all Provincial and Local Government tourism sector strategies will be aligned to the National Tourism Sector strategy.

10.7 Beneficiation of local communities from local tourism resources

The committee notes with concern the continued exclusion of rural communities surrounding the Transfrontier Parks , nature and game reserves in the mainstream tourism economy from the benefits accrued from these local natural assets.

Ø The Department of Tourism should work with other agencies such as South African National Parks , Isimangaliso Wetland Park , Maluti-Drakensberg Transfrontier Park , and others to come up with cheap concessions that could be accessed by local Small Medium and Micro Enterprises into operating lucrative local tourism businesses.

Ø There should be social tourism concessions packaged to promote domestic tourism for local rural communities living around protected areas.

10.8 The impact of Indaba

The committee notes with concern the space constraints due to venue and decline in number of participating buyers and products at Indaba. This hampers the expansion and growth of Indaba as a premier tourism consumer show in Africa . The committee also notes with concern the negative sentiments raised by some tourism stakeholders on the dwindling impact of Tourism Indaba. The committee recommends that:

Ø A decision should be taken to host a Tourism Indaba permanently in one city in the country as is the norm with other international tourism shows such as WTM which is held every year in London , ITB which is held annually in Berlin , and Fitur which is held annually in Madrid .

Ø A new and bigger venue that will allow for expansion and new innovative ideas should be identified.

Ø The Indabas should be designed to include formally scheduled seminars on topical domestic and global tourism issues which will enhance the event and elevate its stature internationally.

Ø The Budget for the Department should be increased to allow SA Tourism to overhaul Tourism Indaba.

Ø The Department should enter into a partnership with the city that will be granted permanent hosting rights to build a new customised venue and develop a long term strategy for the event.

Ø Cost of the participating in Indaba is too high and there is no value for money.

10.9 Setting tourism research agenda

The committee notes with appreciation the Memoranda of Agreements that have been signed with some universities throughout the country to conduct research on specific commissioned topics. The committee recommends the intensification of this initiative through:

Ø Cooperation between the Department of Tourism and the Department of Higher Education in declaring and working with some universities as Centres of Excellence in line with the United Nations World Tourism Organisation Research and Knowledge Management agenda.

Ø Positioning South Africa as a source of credible tourism research, statistics and knowledge management in the continent which will promote the country as a centre of knowledge for regional tourism and close the tourism information gap that exists in and about Africa .

10.10 Facilitating product development and job creation

The committee notes the immense potential of the tourism industry to create jobs at a local level and recommends as follows:

Ø Development of products from local tourism niches identified by the Department, in partnership with provincial and local government, to improve diversification of local product offerings thus creating sustainable employment at a local level.

Ø The Department should forge partnerships with public Development Finance Institutions such as the Industrial Development Corporation, the Development Bank of South Africa and others to fund local projects.

Ø The Department should commission feasibility studies and business plans for strategic job creation projects to unlock funding from both the public and private sector funding, such as Jobs Fund, the Presidential Infrastructure Coordination Commission and the Development Bank of South Africa .

Ø Tourist Levy (TOMSA) utilization for communities adjacent to SANParks.

10.11 Elevating status of tourism at a local level

Tourism features very low on the priority outputs of the local municipalities due to competing needs such as water, electricity, infrastructure, housing, sport and recreation. As a result, municipalities regard tourism as an unfunded mandate placed on local government. The committee realises- that tourism activities take place at attractions within municipalities and the municipalities need to be capacitated to plan and develop tourism and thus recommends as follows:

Ø Tourism governance or coordinating structures that emulate national structures should be established at municipality and provincial levels to ensure seamless integration and coordination of alignment in the delivery of tourism mandate

Ø The Department of Tourism should intensify engagements with the South African Local Government Association (SALGA) to ensure that municipalities budget prioritise adequately for the tourism sector as one of the economic sectors.

Ø The Department of Tourism, in partnership with provinces, should devise interventions that will ensure municipalities’ understanding of tourism as a concurrent function as stipulated in Part A of Schedule 4 of the Constitution of the Republic of South Africa in assisting them to meet their mandate as a sphere of government.

10.12 Consumer needs for new markets

The committee notes with concern that there is an expressed communication challenge for the new markets that hamper full exploitation of the country’s tourism attractions. In consideration of current and emerging tourism trends, the committee recommends that:

Ø The Department of Tourism and South African Tourism should ascertain if the current market segmentation addresses the growing international tourism trends from Africa, China , Brazil , and other emerging markets to ensure sufficient market insight.

Ø The Department of Tourism, in partnership with the private sector, should devise programmes that will address language and communication issues with regard to tour operators, tour guiding and tourism promotional material in response to the growing tourism interests from new markets and explore technologies that could make communication easier for the emerging markets such as China .

10.13 Seasonality and geographic spread

The committee notes that tourism in South Africa is hindered by the challenge of seasonality and unequal geographical spread of development and tourism arrivals.

The committee recommends that:

Ø Cooperation should be established between the Department of Tourism and the Department of Sports and Recreation in converting sporting events into tourism events throughout the country.

Ø Cooperation should be strengthened between the Department of Tourism and the Department of Arts and Culture to promote cultural events into local and international tourism events.

Ø South African Tourism in partnership with the private sector should develop tour packages that will mitigate seasonality within the tourism industry. Provincial marketing agencies should also be engaged in developing local packages.

Ø The Department of Tourism and South African Tourism in partnership with Provinces, should develop social tourism packages to stimulate tourism in less visited Provinces.

Ø The department should place more emphasis on the importance of growing domestic tourism and local events into national and international spectacles in order to sustain the industry and create more sustainable jobs.

Ø The Department should grow the Africa market to promote regional tourism.

10.14 Rural tourism development

Rural tourism remains a challenge in the country. The Department of Tourism should work with the Department of Rural Development and Land Reform together with other government departments to tailor responses to this challenge in terms of programmes and budgets to address disparities and align programme to optimize actions that would cushion the vulnerable groups. Some of the programmes have already been identified in a number of tourism strategies that have been developed by the Department.

The Department of Tourism should engage the Land Claims Commission on the outstanding land claims that affect rural tourism development and craft after care programmes to support communities that inherited land with tourism projects.

10.15 Air Lift Strategy

The committee notes initiatives undertaken by the Department of Transport to align air transport with other national strategies of national interest through interdepartmental participation as well as general infrastructure requirements of South Africa . Central to these initiatives should be to reduce total cost of travel to South Africa .

The committee recommends that:

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

10.16 Piloting of the training programme

The noted the contribution of the Mpumalanga Regional Training Trust (MRTT) which is a non-profit organization in providing tourism skills.

Ø The committee recommends piloting of a partnership between MRTT, CATHSSETA and the Department of Higher Education and Training in ascertaining how non-profit organizations can contribute in providing tourism skills. If the pilot project yields positive results, the project could be implemented in other provinces.

11. Appreciation

The committee would like to extend special appreciation to the Ministry, the Director- General, programme managers and heads of entities for providing support to the committee throughout the financial year. The committee would also like to thank the Office of the Auditor-General in providing support to the oversight activities of the committee.

Report to be considered.

[1] Departmental Medium Term Strategic Plan 2010/11-2014/15.


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