National Department of Tourism 2016/17 Annual Report, with Auditor-General input

Meeting report

Auditor–General of South Africa Budget Review and Recommendations Report
Mr Virtay Rambali, Senior Manager, AGSA, presented the Budget Review and Recommendation Report (BRRR).
In support of the accountability theme for the 2016/17 financial year AGSA had taken two initiatives namely; the status of record review and a review of its audit methodology. AGSA checked the status of record review at least three times a year.

On best practices to be maintained to sustain audit outcomes, when things were not going well AGSA looked at root causes but when they were working well AGSA spoke to best practices.

AGSA had solicited new commitments from the Minister of tourism, Ms Tokozile Xasa, though they were long term commitments such as the marketing strategy from South African Tourism (SAT).

Mr Thami Zikode, Business Executive, AGSA, praised the SAT and the National Department of Tourism (NDT) for obtaining a clean audit as they both recently had been awarded certificates and trophies in that regard.

Discussion
Mr G Krumbock (DA) said most of the report tended to be of a financial nature, in a sense that the accounts had been examined and there was a high emphasis on fruitless and wasteful expenditure, and sustainability of financial health outflows. Had any work been done in what might be termed as a performance audit in other words if one would be looking at the amount spent on various programmes and ask oneself the question: had that been the best way to spend money to get such a result, or to get more out of the money and ask, could what had been audited be done differently to reduce the amount of money spent to get more out of the money. Could the money have been spent differently?           

Ms E Masehela (ANC) wanted clarification as to what exactly was being communicated from slides 13-15.

Mr S Bekwa (ANC) said that NDT was charged with the responsibility of creating an enabling environment for South Africans to participate in the mainstream economy and if it received the clean audit, had AGSA been looking at using of money correctly only or had it also looked at the impact of the project that had been put there on the ground.

Mr Rambali replied that when talking about impact and value for money one was talking about the three E’s of the economy, efficiency, effectiveness. In the audit process specifically, the regularity of the audit process of which AGSA benched the audit outcomes, when it did performance reporting and assessing performance it looked at usefulness, whether targets and indicators met the SMART (Specific; Measurable; Achievable; Realistic; Time Bound) criteria and then looking at credible performance reporting. That looked at whether when one said one had achieved something; had one evidence to support that achievement and if one took it within the NDT portfolio, specifically around the big area which was the Expanded Public Works Programme (EPWP) which was where value for money and the three E’s would come in. If also one considered the marketing strategy and three E‘s and whether could it have been done better or differently. AGSA could not comment on that as it did not go to that extent of testing the three E’s. That would be specific to a performance audit and AGSA did not want to get to a performance audit around the EPWP at that stage because the NDT was undergoing a review process with the assistance of the Government Technical Advisory Centre (GTAC) around the technical feasibility of the EPWP projects, so AGSA thought that until that process was concluded it did not think it wise to get into that space with a performance audit.

AGSA had not considered a performance audit on a return on investment around marketing expenditure and whether it could have been done differently. AGSA had not tested that. Its report was limited in that sense as it did not talk to the three E’s. The difference between a performance audit compared to an annual audit was that normally in the annual financial statements when AGSA audited the financial statements it would do so in line with a particular framework that was applicable. The NDT used the modified cash standards and SAT would use standards of Generally Recognised Accounting Practice (GRAP) to produce audited financial statements or any other framework that was applicable. AGSA would then focus on compliance matters where it looked at legislation, and then it looked at pre-determined objectives where it looked at the framework prescribed by National Treasury (NT). The difference between that and a performance audit when looking at the three E’s, AGSA had to sit with a particular Department and agree on criteria, that is; scoping had to be an agreement.
For the five things that would be evaluated on the performance audit AGSA had to look at economy for instance: indeed, a Department would have procured having received three quotes, and if one quote was R5 000 which was the lowest, could it not have employed someone else, for just over R1 000 who could get it a quote for R2 000. That was a different ball game all together. Thus, if one wanted to go that route which was not necessarily legislated as part of the audit process in terms of the PFMA; that had to be requested and if such a request was received AGSA entertained such.

Mr Rambali clarified that in slides 13 and 14 AGSA touched on the performance reporting of programmes 2 and 4 and reflected that there were no material findings in auditing the usefulness or credibility and reliability of the report performed both for the NDT and on the SAT.

On slide 15 AGSA touched on financial health as it related to the going concern’s ability in meeting its obligations and was based on the numbers in the financial statements and that spoke separately to slide 13 and 14 talking to performance reporting.

The Chairperson thanked the AGSA for coming before the Committee.

The Chairperson said, as the Committee had recommended, it was important that NDT developed the Environmental Impact Assessments (EIAs) before putting together a plan of action because developing EIAs after planning made objectives unachievable eventually.

Deputy Minister’s Remarks
Ms Elizabeth Thabethe, Deputy Minister, NDT, said that the NDT’s 2016/17 Annual Report (AR) had been accompanied by AGSAs audit report which showed that corporate governance at NDT was consistent and well established within its divisions. The NDT had heeded the Committee’s call to maintain a clean administration in the 2016/17 financial years (FY) in order to maintain clean audit outcomes.

At the end of 2016/17 NDT had achieved 89% of its targets compared to 84 of 2015/16.
NDT continued to train new young chefs where 50% continued being absorbed by the hospitality industry.   

NDT was continuing to work with SAT to curb the decline in domestic tourism. NDT had participated with the Department of Environmental Affairs (DEA) on the Mahala week where many of the previously disadvantaged citizens of South Africa were allowed to visit game parks and other attractions free.   

The Chairperson noted that a bed and breakfast (BnB) in Limpopo were singing the praises of the Deputy Minister that whenever she was in Limpopo she used BnB’s in the area of Polokwane and the Committee appreciated that.

Deputy Minister Thabethe said as Government they had to continue supporting small businesses and had to walk the talk and visit the BnBs at every opportunity and she had started long before joining NDT to use BnBs. She had met about 90 BnB owners, which were hidden gems at a recent SA tourism Ndaba. She was disappointed that no member of the Committee had attended the recent National Tourism Careers Expo (NTCE) in Bloemfontein, in the Free State. There had been about 9-10 000 youth in attendance at that Expo.

Department of Tourism Annual Report for 2016/17
Mr Victor Tharage, Director-General (DG), NDT, said NDT had presented its 2015/16 annual report where its overall performance on its targets had been at 84%. For the 2016/17 FY NDT had achieved 89% of its targets meaning there had been a 5% improvement in actual performance at NDT.  An exercise completed by the Department of Planning, Monitoring and Evaluation (DPME) using the Management Performance Assessment Tool (MPAT) published the MPAT results from time to time. The NDT in 2016 had about 80% performance according to the MPAT and in 2017 the MPAT showed a 9% increase performance for NDT against its targets.

The NDT had 99% expenditure on its budget in the 2015/16 FY whereas in the 2016/17 FY expenditure had stopped at 90% considering that it had requested a roll-over for the Expanded Public Works Programme (EPWP).
NDT’s performance on women empowerment, especially employment of women within its structures, had been at 49% in the 2015/16 FY, in the 216/17 FY that number was at 50.7% which was an area that NDT was proud of as evident even in the delegation before the Committee. There had been 5% of employees with disabilities and in the year under review where a regression had occurred as the number was 4.6% due to NDT creating a good working environment for such individuals. In 2016 the 5% referred to 24 people at various units within NDT, typically those individuals would be offered opportunities in corporate environment in the private sector and because they were in critical areas like policy development, international environment, domestic travel and NDT corporate divisions NDT tried to retain them but were happy also when they moved on. 
NDT continued procuring services from 100% Broad-Based Black Economic Empowerment (B-BBEE) compliant providers and were exploring how it could bring on board and empower Small, Micro and Medium Enterprises (SMMEs).
Mr Tharage said time sometimes did not allow NDT to present in detail the impact of its programmes. The NDT were in collaboration with the Robben Island Museum (RIM) where about 20 women from the townships of Cape Town were undergoing intensive training to produce crafts that could be part of the memorabilia for tourism on the Island. Additionally, the savings which would result from moving away from diesel power to green energy resources for powering of the Island would be very significant.

On Programme 2 Policy and Knowledge Service, 16 targets out of 19 from the previous FYs Annual Performance plans (APP) had been achieved and two of the unachieved targets related to Environmental Impact Assessments (EIAs). 

Discussion
The Chairperson asked Mr Vos to address the matters he had raised in his letter to the South African Maritime Safety Authority (SAMSA) and RIM during the discussion.

Mr Bekwa said he had thought that on domestic tourism, NDT would have spent more on cultural activities, as he believed there was a way to spend more time there to attract international tourist, had NDT considered that, because that was where more people were?

Ms T Xego (ANC) was concerned about the incident that had happened with the Dutch tourist at OR Tambo international Airport, and though she was aware of the South African Police Services (SAPS) involvement what had NDT done in that regard? She commended the clean audit, but wanted to know whether there were punitive measures in place for irregular expenditures? What had happened to the money for the EPWP as the Committee had been told it had not been used, including to North West, and other provinces

Ms E Masehela (ANC) expressed concerned about the issue of EPWP and its funding having been returned to NT and wanted a more simplified explanation, but commended NDT on their work in meeting its empowerment target for the disabled. How did the NDT relate with other Government Departments in terms of infrastructure and refurbishments as Ms Masehela recalled a very sad state of the roads to some tourism destination?

Mr J Vos (DA) said that the Dutch tourist incident was accompanied by another where an American tourist had had a similar traumatic experience in early 2017 and as a result the United States had placed the country as a dangerous place to visit for its citizens. Such occurrences had a serious effect on South Africa’s tourism and he had great appreciation for the work done by NDT coming with plans to improve the country’s tourism sector, but South African citizens first had to be safe before international tourists, as Cape Town had done by linking tourist attraction spots with police stations.
He also wanted to hear from the DG at his level as he interacted with his counterparts in other Departments to deal with the safety of tourists.

He asked for the Deputy DG for Domestic Tourism to elaborate on the target unachieved, in the shortfall in job creation in one of NDT’s programmes. Was the challenge with a sister Department not carrying out its mandate which had affected the NDT’s target achievement? His proposal was that at district level there had to be an inter-mayoral Committee where all the political figures together with the administrative heads of the Departments of Local Economic Development and Tourism (DLEDT) down there to meet more regularly as there seemed to be a disconnect at local Government where there was a lot of duplication and sometimes nothing was actually being done.
 
He had written to RIM and SAMSA to appear before the Committee so that the Committee could be appraised of what had occurred and what measures had been put in place to prevent a repeat occurrence however that was an issue with RIM as there had been a steady increase in visitors from 2016 however; that was not in the domestic visitors’ numbers because of the affordability matter.  What was NDT doing to ensure that RIM was more accessible to SA citizens?  

Mr T Rawula (EFF) asked whether the NDT had engaged in township tourism, especially municipalities like the City of Cape Town, in assisting in creating domestic tourism to improve township economy, as it was surrounded by the ocean and its economy. How did the NDT ensure that municipalities as key stakeholders, made room for the expression of NDT’s transformation targets?
He further asked for more clarity on the current dynamics of the country in those studying Tourism, was that aligned to any NDT strategy as there were a lot of colleges in the Southern Cape offering tourism as a qualification? His concern was around a tourism qualification that was not sector or industry aligned and would make placement and work difficult to find.

The Chairperson asked if NDT would consider developing a national tourism disaster management strategy given the natural disasters which seemed to be visiting the country more frequently and the crime wave which affected tourists to SA. What kind of development support had been given to the 100 rural enterprises mentioned in NDT’s presentation?

What had happened with the unspent funds transferred to South African Tourism (SAT)?

Would NDT consider when developing amendments to the NDT Act looking at the regulatory framework for new platforms like Uber and Airbnb as they were responsible for carriage and accommodation of tourists as well?

What had been the outcome of the roll-over request to NT? When was the NDT expecting a report from GTAC?

DM Thabethe said that the issue of safety was a matter in the ambit of the Inter-Ministerial Committee (IMC) made up of the economic and security clusters as the matter affected the tourism into SA.  

Mr Tharage said the NDT did a lot of work with colleagues and most of that was done behind closed doors. In some instances, NDT went as far as convening with tourism sector stakeholders and industry.

Regarding a security strategy the Committee would have noted that in the past two months there had been almost no incidences around OR Tambo, and there had been a great response of deployment of police. That however, better collaboration with industry stakeholders, so to assist with the upsurge of tourists peaking at one area so that information would be shared with SAPS so that SAPS could deploy more of its members in said area. Previously NDT had run a programme called Tourism Safety Monitor but there was something else that would be piloted in Gauteng province which NDT would introduce. That programme would not be replacing SAPS but would be a friendly face that could direct tourists in the right direction in the instance of a criminal incident. NDT was mindful that the world was evolving much faster and where tourism was to date was where 66 people had been killed in Turkey by a person who had been inside a hotel with 23 guns which had not been noticed by anyone.  NDT always reiterated that the tourism industry fed 1.5 million families in SA and it was not only the tourists which were affected by crime but the families of those directly deriving livelihoods from tourism, and therefore the country had to stand-up and deal with the problems of theft, loss of goods and general crime in the tourism sector.  

The GTAC environment had two components where one was to review the large set of projects which NDT had, so as to advise NDT on how to proceed with them. GTAC had completed its report on all the projects which NDT had required to be reviewed and NDT were presently processing the GTAC recommendations so that it could determine how to proceed, having understood the technical nature of the projects. NDT anticipated that by the end of October 2017 it would have processed its draft report on the GTAC recommendations.

In terms of the full-time equivalent (FTE) numbers NDT had a plan in place to meet its targets for the 2016/17 FY together with addressing the backlog of FTE numbers. The cluster had instructed NDT to address the shortfall it had had from previous years in that regard. NDT had a balance between its skills development programme and its infrastructure projects, therefore what was happening was that NDT was processing its decisions around its infrastructure projects, so that it could inform the mix between infrastructure and skills development. Part of NDT’s challenge in the past was that the only money available for infrastructure projects would have come from its EPWP but currently NT had granted NDT a small amount of additional funds to do infrastructure projects. Essentially NDT was looking at how it could use EPWP money to fund the jobs component of NDT’s its infrastructure projects, so that it could then use infrastructure funding to fund actual infrastructure projects.
The second part of the GTAC work had just started and that was about aligning NDT’s infrastructure component with the Infrastructure Delivery Management System (IDMS). With all that NDT was looking into addressing issues which had plagued the Department in the past including planning, being able to deliver within a specified period of time and following an infrastructure planning cycle which was not necessarily aligned to NDT’s 12 years forecast. NDT was already beginning in its new projects to align to a new way of project management operating and planning.

Regarding the support given to SMMEs, NDT had supported SMMEs with marketing by paying for SMME products to be marketed on all available platforms, furthermore it assisted with business profiling; ensuring that packaging of SMME products was such that they were sellable. There was also business coaching, how to deal with trade, service excellence with training of staff and customer care as well as financial skills in terms of being able to price accordingly. NDT also assisted with legal compliance, in terms of registration, accreditation and the grading. Most important in the assistance provided was ensuring that SMMEs had a work file and how to deal with a diary. On top of the 100 assisted SMMEs NDT also had about 348 across the nine provinces indicating whether the business was a BnB, a guesthouse or a lodge. Recently NDT had been doing workshops with domestic tourism operators across the provinces and NDT had also developed a culture and heritage strategy to focus on rural tourism which was set in rural areas. In that regard NDT had engaged the Department of Rural Development and Land Reform (DRDLR) and aligned itself to the commitments within DRDLR. All NDT’s 9 world heritage sites were in rural areas which informed the decision to support SMMEs in rural areas.

NDT did engage its sister departments regarding the condition of the roads towards NDT tourist attractions.
NDT played an active role in the tourism curriculum as it had engaged UMALUSI around 2013 since the industry had informed NDT that graduates from Further Education and Training (FETs) colleges had not been aligned with industry standards and requirements. In terms of the Tourism Human Resource Development Strategy (THRDS) NDT had planned that there needed to be a body that would ensure that whatever would be in the implementation plan would be monitored. NDT had first approached the Department of Higher Education and Training (DHET) to share with DHET the outcomes of NDT’s strategy and also to say that there was that curriculum report which both Departments had to see how it could be implemented.

In terms of township SMMEs support, the SMMEs referred to above were based in the townships and in terms of transformation, NDT gave support to the same businesses in the value chain of tourism that could be achieved.

On affordability of RIM; access to all tourist attraction across the country was an area that NDT understood needed attention. In that regard NDT had developed a directory where in some of the attractions there would be discounts for the elderly and school learners to gain access. The directory was continuously elongating.  

The reason why the NDT had not achieved on its EPWP targets was the review on its infrastructure component, and NDT had only worked on the training and because some of the FTEs came from the infrastructure the EPWP target could not be achieved.

NT had not approved the roll-over request from NDT which meant that for the money requested would come out of the 2018/19 budget allocation, unfortunately as payments had already been committed to.

On the SAT unspent funds for grading, SAT did an accrual accounting which meant the money remained with SAT. NDT would look at the budget for the 2017/18 FY and decrease SATs allocation by the amount it had not spent for grading in the 2016/17 FY.

Mr Tharage said that part of the NDT risk management had anticipated the responses from NT regarding the roll-over; therefore, existing contracts like that NDT had with the Industrial Development Corporation of South Africa (IDC) there was space to renegotiate. By the 2017/18 FY a number of contracts would be concluded over and above that NDT had ensured that in its planning it would be able to meet all its obligations.

Regarding the EPWP project; if the NDT took on board new projects with a view that it would meet the EPWP target at a time when the GTAC process was underway. That would have meant NDT could have found itself in a space where it would have undertaken projects which would have taken another three years without there being funding for said projects. In the process of doing the review and GTAC doing work NDT had been allowed to take R13 million from the EPWP budget to actually meet the remaining obligations in the ongoing contracts. Having gone through restructuring and reduced its establishment from 648 to 508 NDT had so impressed NT that NT had noticed and the negotiation for the money for obligations that were concluding had been on that basis.

NDT was continuously engaging industry on aligning the tourism curriculum with its needs and standards as there were huge opportunities like in the Winelands region around the Vaal river where learners could be routed for qualification in that sector.  

RIM had a work plan where NDT was fully on board where the Chief Executive Officer (CEO) of RIM kept the DG abreast of all RIM developments. Future collaborations with RIM would be announced to the Committee.

The tourist amendment Bill, Mr Tharage requested that the Committee allow NDT to process that work a little more. There had been a dialogue session with the players in the sharing economy and there were multiple options for interventions as some countries intervened at a city level; for example, Airbnb would be regulated as a normal BnB. Alternatively, at provincial level there would have been pronouncements contrary because of the issue around the three spheres of Government, but NDT was more focused on the accommodation aspect. NDT were hoping to bring the Bill to Parliament in the 2018/19 FY.
 
Khalanga project started in 2009 by NDT and the Committee was up to date over the status quo, which was that the project had been handed over. Handing over from NDT’s understanding was that the paperwork required according to the Public Finance Management Act (PFMA) between the two contracting parties had been properly concluded. All the assets had been documented where there would have been a contract to say the assets had been handed over to a particular entity in a particular format and condition. That had been done in April 2016. In ensuring that the project would be sustainable, NDT had worked with the province of Limpopo, the local municipality and owning entity, and had invited different operators familiar with the area. Operators that had come had been debriefed about the requirements and a suitable person had been identified through that process. Subsequently the identified person reneged and did not want to proceed with the work because NDT would not be responsible for paying though the arrangement reached had had an expectation of profit sharing whilst also recovering what would be deemed management fees. That had not been acceptable to all the parties, and NDT had to restart a process to identify another person to do the work; which had happened and the identified person was willing to come on board as a strategic partner and continue but the terms of agreement could not be concluded again by the owning entity and that potential passed. Before Mr Tharage came on the day he had been in contact with the Limpopo Head of Department (HoD) of tourism to find out whether the province had an agreement to support the project. The response was that the province had agreed to support the project but on condition that the terms of agreement of the province for the project would be met. Essentially Limpopo province was not prepared to put money into the Khalanga project.  When NDT put money into such projects that was to ensure that jobs would be created at a particular locality, that is; someone would manage, another would operate and there would be cooks and cleaners in similar projects and when those happened the NDT believed that communities had derived a benefit.  
The challenges with the project were the conditions and NDT had handed over the project almost two years ago and the reality was that it required an operator with skills and competencies to manage the project. Other technicalities were about the boreholes where unfortunately the ground was dry and NDT appointed engineers on the basis of certification and competency for that particular purpose. The engineers would submit a report and that would be given to the municipality which would send its own engineers to do similar work and provide a report, and as accounting officer Mr Tharage worked on the basis of those reports. Although Limpopo was ready and could assist NDT had shown the province the original contract which designated the tribal authority as the owning entity of Khalanga and that NDT could not unilaterally renege on that agreement and decide to change the ownership of the project as that would be breach on NDT’s side and everybody understood that. Going forward though; NDT had learnt to not be involved in such agreements when completing projects but to have a strategic partner from the beginning. 

The Chairperson thanked the Department for the presentation, the Committee would not engage further because of time restraints but would follow the Khalanga process as it was unfolding.

The meeting was adjourned.