Minister on Department of Tourism & South African Tourism strategic plans and budget briefings

Meeting report

The Minister of Tourism, Mr Marthinus van Schalkwyk and the Director General of the National Department of Tourism, Mr Kingsely Makhubela supported by a large contingent was in attendance. Ms Thandiwe January-Mclean, Chief Executive Officer and Mr Johan van der Walt, Chief Financial Officer, represented South African (SA) Tourism.

Chairperson’s Opening Remarks
The Chairperson at the outset of the meeting thanked the Minister and the Department for the wonderful leadership that had been shown at the Tourism Summit which the Committee had hosted recently. He also thanked the Director General and his team for the inputs that were made at the Summit. The Chief Executive Officer of SA Tourism, Ms Thandiwe January-Mclean, was additionally thanked for the direction that had been received at the Summit. Job creation was critical and tourism had the ability to create jobs. The Committee’s task was to perform oversight and to consider strategic plans. The issue of funded vacancies needed to be addressed. The Department also needed to inform Members of the benefits of international instruments that South Africa was signatory to. Quality assurance within tourism was another issue that required constant attention. 

Minister’s Opening Remarks
Minister van Schalkwyk noted that in 1994 tourism contributed 5% towards the national Gross Domestic Product (GDP). The figure currently sat at 7.7%. Tourism was slowly taking its place as an important part of the economic sector. Tourism was part of the National Growth Plan. He stated that he would comment on three issues, namely, international arrivals, domestic tourism and lastly unilateral taxes by European Union countries. In 2010 there had been good growth in international arrivals. The 2010 FIFA World Cup was the basis for the increase. Growth was evident for each of the months of 2010. The Minister was proud that South Africa had registered the highest growth of any region in the world. In many parts of the world there was a stagnation of the tourism market. In Europe stagnation sat at 8.1%. The one market South Africa had to focus on was Brazil. Its outbound tourism figure was 26% which South Africa received no benefit from. Africa as a continent should not be underestimated as a potential for growth in South Africa’s tourism. He pointed out that South African Airways (SAA) had identified new destinations in the African Continent. Domestic tourism was considered the backbone of any tourism industry. The Department continued to invest in it. R70m had been budgeted for domestic tourism. In 2010 14.6m adults travelled domestically.30m domestic trips were undertaken. The net value of domestic tourism income was R22bn. Unilateral taxes were imposed by some of the European Union countries. The Minister warned that the impact of these taxes should not be underestimated. Taxes almost made up 50% of ticket prices. The United Kingdom was the first to introduce a departure tax. Germany, Netherlands and Austria followed suit. Netherlands however decided to abolish it after realising the damage it was causing to the economy. In the UK the departure tax was 75 pounds of the price of an economy class ticket. . There was a 10-15% drop in figures for tourists to SA.  A tax should be reasonable, transparent and non discriminatory. The departure tax was not. The Minister asked the Committee to take heed of the problem that departure taxes could have on tourism in SA

National Department of Tourism Strategic Plan for a Period 2011/12-2015/16
Ms Nomzamo Bhengu Chief Director: Business Performance, Strategic Partnership and Risk Management, Department of Tourism, undertook the briefing. Ms Bhengu provided the Committee with an overview of each of the Department’s Programmes, namely Administration, Tourism Development, Tourism Growth and lastly Policy, Research, Monitoring and Evaluation and the planned initiatives within each programme. She also highlighted the Department’s strategic goals which were to achieve good corporate and co-operative governance. She proceeded to provide a detailed breakdown of each of the Department’s programmes by elaborating on each programme’s strategic objectives, its risks and mitigating factors, and its indicators and targets.

Administration
Having an effective organisational performance management system and a capable and skilled workforce were some of strategic objectives. One of the risks was poor implementation of systems, the mitigating factor was that there was to be developed and implemented an Enterprise Architecture Framework for the Department.  Relating to indicators and targets the baseline current vacancy rate was 21%, the idea was to reduce the funded vacancy rate by 10%during 2011/12.

Tourism Development
To create employment opportunities by implementing tourism projects targeted at the unemployed was a strategic objective. Fraud, corruption and conflict of interest was identified as a risk with the corresponding mitigating factor being that investigations would be conducted on all suspected cases and to institute disciplinary measures on implicated officials. On indicators and targets the number of unemployed youth trained in hospitality fields and placed for experiential learning was 300.

Tourism Growth
To improve service levels in the tourism industry was a strategic objective. Lack of co-operation by government entities and stakeholders to support government initiatives was identified as a risk; the corresponding mitigating factor was to ensure early engagements and consultation of the sector and stakeholders and the review of significance of current structures versus beneficiation by the electorate. On indicators and targets the number of young people trained and placed as chefs per year in the hospitality industry baseline figure sat at 150, during 2011/12 the idea was to recruit, train and place 800 young persons.

Policy, Research, Monitoring and Evaluation
Monitoring and evaluation of tourism sector performance, strategies and policies was identified as a strategic objective. Non compliance and unavailability of data/information were risks which could be mitigated by developing monitoring and evaluation frameworks and reporting schedules and purchasing data from other sources respectively. As far as indicators and targets were concerned the frequency of state of tourism reports for example would be one per financial year.

Mr Ralph Ackerman Chief Financial Officer continued with the financials of the Department. He provided the Committee with a breakdown of allocations per programme. For the financial year 2011/12 the total allocation was R1.242.876bn. The allocations per programme were Administration- R173.763m; Tourism Development- R348.140m; Tourism Growth-R694.074m and Policy, Research, Monitoring and Evaluation-R26.899m. There had been an increase of 7.9% in the budget from R1.151.836bn in 2010/11 to R1.242.876bn in 2011/12.

On the issues of filling of vacancies that the Chairperson had mentioned earlier in the meeting, Mr Ackerman stated that the Strategic Plan had been aligned with the Budget. The filling of posts had to be phased in. Only in the third year would the posts be fully funded.

The Chairperson asked whether there were projects that were not mentioned in the presentation.

Mr Makhubela conceded that there were projects not mentioned in the presentation. For example the issue of the Convention Bureau and the lack of funding associated with it were one such project. Tourism needed to focus its efforts on emerging markets like Brazil. The Department could do so much more if it had better funding. The Department was like all other departments trying to keep its expenses to a minimum.

The Chairperson stated that watching expenses was all good and well but in order to get things done money needed to be spent.  Everything costs money and it t was indeed a balancing act between saving and spending. The issue of the Department’s Budget was an ongoing dialogue which needed to continue.

South African (SA) Tourism updated Strategic Plan for the 5 year period 2011/12-2015/16
Ms January-Mclean undertook the presentation. South African Tourism selected its markets every three years taking into consideration the latest marketing intelligence. The process was referred to as the Portfolio Review process. Like with previous Portfolio Review processes, SA Tourism adopted the following process during the 4^th Portfolio Review process which indicated the markets on which SA Tourism would focus on for the following three years effective from 1 April 2011. The review adopted a “fresh eyes” approach by considering all the countries in the world, and filtering them based on a set of objective attractiveness criteria. The Portfolio Review process followed a 1^st , 2^nd , 3^rd and 4^th filter approach. The results of the evaluation would illustrate the suggested core markets (attractive and easier markets) examples Angola, USA and Australia, tactical markets(less attractive but easier markets) examples New Zealand, Ireland and Lesotho, investment markets (attractive but difficult markets) examples DRC, Brazil and China and lastly watch-list markets(less attractive and difficult markets) examples Austria, Argentina and Malawi within each region.  SA Tourism identified four strategic outcomes orientated goals which identify areas of organisational performance that were critical to the achievement of its mission. Strategic Outcome Orientated Goal 1 was to market SA in such a way that annual arrivals to SA increase. The arrivals target for 2011, 2012 and 2013 were 10 295 520, 10 398 476 and 10 502 460 respectively.  Strategic Outcome Orientated Goal 2 was to market SA in such a way that the expenditure of all people arriving in SA increases while being in SA. The expenditure target per person for 2011, 2012 and 2013 were R9222, R9775 and R10360 respectively. The total expenditures were R126.1bn, R135.7bn and R146bn for 2011, 2012 and 2013 respectively. Strategic Outcome Orientated Goal 3 was to market South Africa in such a way that the country became the most preferred tourism brand by 2014. South Africa should become one of the most preferred tourism brands by 2014 as measured by the criteria of brand knowledge, brand journey and conversion of positive brand awareness to sales. In 2009 the global average for most of the brand knowledge metrics improved however it continued to drop for welcoming people and safety and security. South Africa had improved in both awareness and positivity but declined on sought info and likely to visit on the next 18 months due to the slowdown in global travel. Strategic Outcome Orientated Goal 4 was to continuously improve SA Tourism’s internal policies and procedures.

Mr Johan van der Walt continued with a brief breakdown of SA Tourism’s consolidated key performance areas for 2011/12 financial year. Approved CPIX parameters for SA was 5.8% for Japan it was 1.5%. He gave the Committee revised exchange rate figures for various currencies like the dollar, pound and yen. The total revenue for SA Tourism was R840 193m. Grading fees made up R25 917m and Indaba and Meeting Africa revenue made up R26.5m of the total. The budget of SA Tourism had been cut by R54.3m in 2011/12. SA Tourism invested aggressively in a global marketing campaign. Investment in research was critical in order to keep abreast of brand performance. The staff complement of SA Tourism would grow to 184 employees.

Discussion
The Chairperson stated that due to time constraints the number of questions by members would be limited. Perhaps questions could be reserved for when the Committee next met the Department and SA Tourism.

Ms M Njobe (COPE) asked how tourism was affected by issues of climate change. She referred to the presentation document of the Department on pages 12 and 13 and asked why the terminology of black graduates and black SMMEs was used. What portion of SA Tourism’s budget was spent on domestic tourism? She referred to the Department’s decision to place the opening up of an office in Brazil on hold and asked whether the decision was not disadvantageous to South Africa.

Mr Myron Peters Chief Director: Consumer Protection and Responsible Tourism stated that the Department of Environmental Affairs had a Green Paper on climate change. He noted that each sector including tourism had to develop a Climate Change Plan. The Plan related directly to business in the tourism sector. For example floods would affect food supply in the industry, rising temperatures affected flora and fauna and drought affected water supply.  Plans had to be in place to regulate waste as well, for example to curb carbon emissions.

Mr Makhubela responded that there were huge disparities in figures of SMMEs. In Cape Town for example most of the accommodation in the city centre was white owned whereas in Gugulethu one would find small concerns that were black owned.

Ms January-Mclean stated that there was no doubt about Brazil being important. An office in Brazil was needed but the issue was about where the funding was needed more. Perhaps in the future South Africa would still open up an office in Brazil. Brazil was an investment market for South Africa.

Mr van der Walt stated that the domestic tourism budget for 2011/2 was R19.5m. The domestic tourism budget was the same as the previous year. The idea was to make domestic tourism a stand alone unit. 

Ms J Terblanche (DA) requested SA Tourism to furnish Members with copies of the presentation document. It was difficult to follow the presentation without having a hard copy.  She asked what the opinion of SA Tourism and the Department was on the building of extra hotels and conference facilities in the Kruger National Park. Was there a need for more facilities and what would the environmental impact be? What was the main thrust behind the building plans?

Mr van der Walt replied that the Kruger National Park built up areas was far below the world standard. The hotels and conference facilities to be built was catering for a different type of tourist. The experience offered was somewhat different from the conventional one.

Mr Makhubela pointed out that the Department was guided by the Department of Environmental Affairs on the Kruger National Park issue. 

Ms J Maluleke (ANC) referred to the Department’s disability figures (on employment) sitting at 2% and asked if it a problem to reach the 5% as suggested by the Deputy Minister.

Mr Makhubela stated that the Department’s target for disabled persons was 2%. The Department’s actual figure was 2.5%. The new target was now 5%. There were challenges in meeting the target of 5% but it was nevertheless achievable.

The meeting was adjourned.