South African Tourism 2018/19 Annual Report, with Minister

Meeting report

The Chairperson said that SA’s society had been racially segregated in the past and it had to be solidified into one. SA had to have a national democratic society. Tourism had to make its own contribution towards it. Mr Oliver Tambo had single-handedly written the Harare Declaration and it was befitting that October was Oliver Tambo Month.

Opening Remarks by Minister
Ms Mmamoloko Kubayi-Ngubane, Minister of Tourism, apologised for the absence of the Deputy Minister of Tourism. He was attending a cabinet meeting. She noted that in the previous day’s meeting good discussions had taken place with the Committee. The recommendations made by Members would assist with what needed to be achieved. SAT was the only entity of the NDT. The functions of the SAT Board were her responsibility. Why did the SAT Board have an interim Chairperson? She explained that Ms Pamela Yako had resigned as Chairperson of the SAT Board but had remained on as an ordinary Board member. Ms Tania Abrahamse had also resigned as Deputy Chairperson of the SAT Board. Minister Kubayi-Ngubane indicated that she had accepted both resignations. She had consulted with cabinet about the resignations and both positions would be appointed soon. She had met with the SAT Board the previous week and was encouraged by the work that it was doing. Things were functioning effectively. The Chief Executive Officer (CEO) of SAT Mr Sisa Ntshona had been suspended. There was no disciplinary as yet. She had received a report which had recommended that the CEO go through a disciplinary. She had given concurrence that the disciplinary of the CEO should go ahead. The Disciplinary Committee (DC) had started. It fell within the ambit of the SAT Board.

She noted that there were concerns around the performance of SAT. Performance sat at 56% whereas it should be above 80% as was the case with the NDT.  She however accepted full responsibility. SAT did have men and women that were fully committed. She had met with SAT’s entire staff and had requested feedback. A new performance plan was being put together under a new administration. She had also met with the Auditor General of SA (AGSA) about SAT’s unqualified audit opinion. The major concern was SAT’s irregular expenditure. SAT would deal with the issue. She would report to the Committee on progress made. The post of Chief Marketing Officer (CMO) had been filled. The tide would turn and SAT’s performance would improve.

Input by Interim Chairperson of the SAT Board
Mr Ravi Nadasen, Interm chairperson, SAT Board, said that he had served on the Board since 2018. He was also the Chairperson of the Tourism Business Council of SA (TBCSA) and was the Chief Operations Officer of Tsogo Sun.

He provided the Committee with an overview of SAT’s 2018/19 audit outcome. SAT achieved an unqualified opinion because it did not have material misstatements identified during the audit but had material non-compliance findings and material misstatements on Audit of Predetermined Objectives (AOPO).

There were material findings attached to the audit outcome. Irregular expenditure amounted to R98.5m. Disciplinary action had been taken against employees by way of written warnings and there had been dismissals. SAT was learning from its mistakes and had taken corrective action. SAT’s Board took ownership of SAT’s performance. For 2018/19 domestic trips had increased by 12.7%. International arrivals had decreased by 0.6%. SAT on its performance had achieved 15 of its 27 Key Performance Indicators (KPIs). The SAT was taking remedial action to improve performance. To prevent issues from recurring they would be tabled in sub-committee meetings. SAT would endeavour to be more preventative than reactive. The SAT Board had filled the two positions of Chief Financial Officer (CFO) and CMO. The Executive team was operating at full capacity. He assured the Committee that SAT staff was working hard. Even though SAT’s CEO was going through a disciplinary the organisation was functioning. The disciplinary process would resume in two weeks’ time. The process was entrenched in fairness. The term of the SAT Board had started on 1 June 2018. SAT’s Board continued to provide oversight. Unfortunately, the SAT Board had lost four members over the past few months. The SAT Board needed certain skills. It was committed to growing tourism. SAT heeded President Cyril Ramphosa’s call of attracting 21m tourists by 2030. Challenges were plentiful but anything was possible if everyone pulled together. 

Briefing by SA Tourism (SAT) on its Annual Report 2018/19
Ms Sthembiso Dlamini, Acting Chief Executive Officer (ACEO), SAT, stated that for 2018/19 international tourist arrivals had declined by 0.6% and that domestic trips had increased by 12.7%. On the SA National Convention Bureau’s performance for 2018/19 the total number of bid submissions was 108. At the end of the year 42 bids had been successful, six were unsuccessful and 60 were still pending an outcome. Tourism grading performance for 2018/19 were that at 31 March 2019 there were 5 147 graded establishments. This was a 2% growth compared to the same period in 2018.

The briefing continued with a breakdown of SAT’s performance for 2018/19. In total there were 27 KPIs of which fifteen had been achieved. In the remaining eight KPIs progress had been made but they were ultimately not achieved.  Performance consequently sat at 56%. Members were given a breakdown of performance per Programme.
Corporate Support Programme          
On staff satisfaction the annual target of 3.4 had been achieved. The vacancy rate target of 7% had also been met. The target on compliance with the Employment Equity Act had also been achieved with the Employment Equity Plan having been submitted to the Department of Labour as per statutory deadline.
Business Enablement Programme
The stakeholder satisfaction score annual target of 4.1 had not been achieved with actual performance sitting at 3.6. The reason for the deviation was because stakeholders were less satisfied with SAT’s synergies to their business and marketing initiatives. Stakeholders felt that greater consultation and collaboration was needed.

Leisure Tourism Marketing Programme 
On the number of international tourist arrivals for the financial year 2018/19 the annual target was set at 11.2m but actual performance only sat at 10.4m. There was thus a shortfall of 7.1%.  The target had not been achieved because overseas markets had underperformed. Safety and security concerns on the back of reports of attacks on tourists contributed to tourists reconsidering SA as a travel destination.
Business Events Programme
On the number of business events hosted in SA the annual target was set at 153. Actual performance however surpassed the target with the figure being 207. The target had been exceeded by 35.3% because a significant number of successful bids were supported by the SA National Convention Bureau and the industry in previous years which resulted in the increase in business events for 2018/19.
Tourist Experience Programme
On the total number of graded establishments achieved the target was set at 6 229 but it fell short by 17.4% with the actual number of graded establishments being 5 147. The target had not been achieved because of changing market conditions in the Small, Medium and Micro Enterprise (SMME) space. Small businesses had opted to change their business models to operate as Airbnbs.

Members were provided with insight into some of the remedial actions taken to address issues around KPIs. For instance, on improving SAT’s stakeholder satisfaction score a stakeholder framework had been developed and a dedicated resource had been allocated to assist in the management of stakeholder relations. On increasing the number of graded establishments, the Tourism Grading Council of SA (TGCSA) had launched its integrated Marketing and Communications Campaign in November 2018, which focussed on driving the value of star grading in both the consumer and trade space.

Ms Nombulelo Guliwe, Chief Financial Officer (CFO), SAT, spoke to the financials of SAT. She said that SAT used the accrual basis of accounting to prepare its financial statements. The total accounting expenditure for 2018/19 was R1 488 919 which comprised of R1 438 252 (cash) plus R50 667 (non-cash). SAT had spent more than 85% of its budget on marketing. This included local and international marketing efforts. SAT was a going concern with total assets of R 733 mil in excess of total liabilities of R 611 mil.

Discussion
Mr H Gumbi (DA) noted that if 80% of SAT’s budget was spent on destination marketing, and asked whether SAT marketed SA in its entirety. Were towns and cities marketed against other towns and cities in the rest of the world? Did SAT market public and private tourism assets? SAT was asked what exactly it marketed.  He had recently visited an area at the Bluff in Durban which was an international whale heritage site. It was a popular area for tourists to do whale watching yet over the past few years it had not been focussed on. Local organisations in the area wished to build on this attraction as a platform for other tourist activities. He asked how SAT would come on board and what would its involvement be. What would the interaction be?

Ms Dlamini replied that consumer work and trade work was important. SAT knew who came to SA. There were consumer campaigns in place ie media, influencers etc. However more could be done. From a trade point of view, she explained that trade partners would not sell a destination that they did not know. Trade partners were thus trained through workshops. It was all about products and experience. Trade platforms such as Meetings Africa and the Tourism Indaba were in place.  

Mr M de Freitas (DA) said that it was evident that international tourist arrivals had decreased and that SAT’s overseas market had underperformed. What was SAT’s plan to turn things around? On domestic tourism he added that it was evident that different entities were not speaking to one another. Case in point was that in Cape Town the Table Mountain Cableway had a special running of rides being R90 per person, yet the public was not aware of it. Entities like South African National Parks (SANParks) tend to work on their own. SAT should use these types of specials as leverage to grow tourism.

Mr P Moteka (EFF) observed that when it came to provinces that were submitting bids it was mostly the tourism established provinces doing so ie Western Cape Province, Gauteng Province and KwaZulu-Natal. The focus for the Committee was on villages, townships and small dorpies. He was aware that it took time to build infrastructure but efforts should take a different direction. SAT needed to change its focus.  He asked Minister Kubayi-Ngubane why the Chairperson and the Deputy Chairperson of the SAT Board had resigned. SAT’s performance of 56% and only achieving 15 of its 27 targets was simply not good enough. In the Committee’s books it was a fail. He was concerned that there was a decline in international trips as well as domestic trips. What was the cause for the decline? It was only the Western Cape, Gauteng and KwaZulu-Natal where there was no decline while for all the other provinces there was a decline. The Committee had recently visited Howick Falls in KZN. One reason for the drop in visitors to the place could be because the place was not clean. The problem was that the funding to many places had been cut. With the SAT’s stakeholder satisfaction only sitting at 12% he asked what was being done about it. SAT had taken steps to dismiss certain staff members like its Chief Executive Officer (CEO). Had funds been recovered? The amounts ran into millions of rand. The NDT had reduced funding so SAT had to recover what it could as the funds it received was less. He was aware that not all irregular expenditure was corruption but not abiding to prescripts was opening the door to corruption. He felt that guilty persons should be dismissed and arrested.

Ms Dlamini said that there was a stakeholder engagement framework in place. There were quarterly meetings with provinces. The idea was to have alignment of plans. Chief Executive Officers (CEOs) of Provincial Tourism Authorities attended the meetings. The Tourism Grading Council of SA (TGCSA) had been strengthened. Memorandums of Understanding (MOUs) were in place. Critical projects were identified. From a management point of view governance had been strengthened and a risk management strategy was in place. Management committees have also been strengthened. The AGSA had said that Executive leadership should provide assurances. SAT intended to fix things and would have plans in place. SAT was using advisory services and had monthly meetings with the AGSA.

Ms T Xego (ANC) said that Minister Kubayi-Ngubane had taken responsibility for what had gone wrong and that corrective measures were put in place. She hoped that in the next financial year nothing would be wrong. The Committee did understand that it was Minister Kubayi-Ngubane’s prerogative to appoint SAT Board members. She however felt that SAT Board members should be reflective of SA. In addition, things should be detected before Board members resigned. SAT had only achieved 15 of its 27 targets. She suggested that during planning before the Annual Performance Plan (APP) was presented to Parliament that some sort of body audit the targets set to check if they were Specific, Measurable, Accurate, Relevant and Timely. SAT was asked where the function of quality assurance resided. If it was with the NDT then a discussion should be had with them. She asked Minister Kubayi-Ngubane to stabilise the SAT Board.

Ms M Gomba (ANC) asked whether enough was being done to market small business. There were various international shows where tourism products could be marketed. Had the Rand Easter Show been used to market tourist products? She asked Mr Nadasen as the Chief Operations Officer (COO) OF Tsogo Sun whether Tsogo Sun still mentored small establishments. On Emerging Tourism Entrepreneur of the Year awards ceremonies she felt that big companies should not be competing with small establishments. There should be different categories where playing fields were level. Marketing shows should also take rural businesses, townships and dorpies on board. Referring to the human resources information, she observed that she had not seen anything on persons with disabilities.

Ms Damini replied that disabled persons were taken into consideration. The figure sat at 0.6% disabled persons for 2018. Numbers were being tracked and it was prioritised. She welcomed the idea to relook at the APP and to review targets.

Mr Z Peter (ANC) appreciated the cohesion that Minister Kubayi-Ngubane was providing. He agreed with Mr Moteka that Howick was in a bad state and needed attention from government. He asked whether the recent attacks on foreigners had caused bookings to be cancelled in SA. Had fears of foreign tourists been allayed? On domestic tourism, he was concerned that trips to the Eastern Cape and Northern Cape were low. What was being done to improve the numbers? He found it unacceptable that Broad-Based Black Economic Empowerment (B-BBEE) targets had not been achieved. Transformation had to take place. On the total number of domestic trips, the target had not been achieved. He hoped that plans were in place to address the matter. SAT had to elaborate more on its remedial plan. On fruitless and wasteful expenditure SAT was asked whether it was not aware of requirements that National Treasury approval was required. What was being done to prevent such recurrences?

Ms L Makhubele-Mashele (ANC) was concerned that the SAT had not gotten a clean audit. Over the last two financial years SAT’s performance seemed to have regressed. There were problem areas. On contract management, contracts had been extended without obtaining national treasury approval. If there was consequence management as SAT had said, persons who were guilty should be brought to book. The Committee should be provided with a report in this regard. The audit opinion from the Auditor General of SA (AGSA) also raised concern that the National Convention Bureau could not quantify the number of participants on bids to be brought to SA. She suggested that Memorandums of Understanding (MOUs) could have a clause stating that companies should give the National Convention Bureau the number of participants. The whole idea was to get value for money. The AGSA was concerned about how the National Convention Bureau did business.

Mr T Khalipha (ANC) observed that the Committee had received good support from Minister Kubayi-Ngubane with her regular attendance at meetings. He hoped this will continue. What was the reason for the Chairperson of the SAT Board resigning from that position but remaining on as a Board member? SAT’s performance of 56% was concerning. The time had come for action to be taken on non-performance. Only 15 out of 27 targets had been achieved, yet no action was taken. There was also no action taken where there was irregular expenditure. Rules had not been followed. SAT did assert that it had an action plan that was in line with recommendations of the AGSA. The only time action was taken was when there was corruption. This should not be the case. Over 50% of the NDT’s budget went to SAT. SAT could not be allowed to perform in a lack lustre way. Things had to be sorted out. Delays in finalising the Chief Executive Officer (CEO) matter also affected the stability of SAT. The matter needed to be finalised. The Acting CEO could only do so much and could not make decisions. He hoped that the CEO disciplinary processes would end soon. To make matters worse SAT also had challenges around resignations from its Board. Board members needed to finish their terms. The Committee felt strongly about the focus needing to be on villages, townships and small dorpies but at the same time did not want cities to be neglected. Addressing Minister Kubayi-Ngubane, he stated that for every quarter of non-performance there had to be action. SAT should be getting a clean audit.

Minister Kubayi-Ngubane, on SAT Board resignations, said they were for different reasons. One resignation had been because the person had started a new company. Another had been because the person had also sat on the Tourism Business Council of SA (TBCSA). The Deputy Chairperson of the Board felt that she had served her term and that it was time for new people to take over. The Chairperson of the Board had offered to step down as Chairperson but would remain as a Board member. The responsibilities of being the Chairperson were way more time consuming than being an ordinary Board member.

Mr Siya Dube, SAT Board Member, said that there was consequence management. Disciplinary actions had to be comprehensive. SAT was aware of what was expected from accounting authorities in terms of legislation. SAT did do follow ups and tried to recover where it could. SAT was drafting action plans and would monitor its progress. Root causes of SAT’s performance would be identified. Where needed disciplinary actions would be taken.

Ms Gomba asked for a record of the appraisal system of the NDT and SAT. The Committee needed to get some insight into who got appraised.

Mr Moteka pointed out that the cost of grading was one of the stumbling blocks of new entrants. It was far too expensive. Establishments could not afford to pay it. There was either a need to offer exemptions or to have it subsidised. He was shocked to see one of the requirements of participating in the oceans economy. In order for a person to buy a boat one had to have security to the amount of R1.5m in your bank account. So by default black people would be excluded. The requirement should be scrapped.

Ms Makhubele-Mashele explained that Mr Moteka was referring to the Isimangaliso Wetland where persons needed to have R1.5m as guarantee to operate there. The good news was that the Tourism Transformation Fund was there to assist those persons. The NDT did have measures in place to mitigate.

The Chairperson noted that the Committee had agreed to have a meeting with the Tourism Grading Council of SA (TGCSA). Who monitored the TGCSA? He felt that the unlawful use of grading plaques should be penalised. It was unethical. Was it the first time that SAT had not gotten the required permission from National Treasury to extend contracts or had it happened in the past? For the past two years, SAT had had problematic audit outcomes. On marketing efforts, he asked whether provision had been made for provinces and municipalities. Besides the private sector, who else did it cooperate with on marketing efforts to make SA the destination of choice? He pointed out that the Zion Christian Church (ZCC) had a massive event annually in Moria. It would be interesting to know what the total number of attendees were. SAT was asked whether it had done a preliminary assessment on whether its 5-in-5 Strategy was on the right track. He asked whether the NDT had a strategy to monitor currency fluctuations to attract tourists to SA as they would be getting greater value for money. He suggested that the quality of service index be introduced. He noted that a collaborative effort was needed between the Committee, the AGSA and the Standing Committee on Public Accounts (SCOPA) on problems around wasteful and irregular expenditure. On Tourism Month in September, the SAT with the private sector, needed to work out promotions where there were free rides at attractions. Free transport to attractions should also be provided. He agreed with Ms Xego that there should be a quasi independent body that should check on whether targets were SMART. SAT was asked whether it had set aside funds for the marketing of villages, townships and small dorpies. He felt that the violent protests in SA did have a negative impact on perceptions in SA. SAT and the Department of Cooperative Governance needed to meet to discuss the matter of how the protests negatively impacted upon SA. He also suggested that golfing tournaments should be held in small dorpies where famous players could be used to market the events. It was something that should be considered. Addressing Minister Kubayi-Ngubane he said that she should encourage cabinet to hold its colloquiums in small dorpies, townships and villages. He further asked how SA collaborated with the Department of Communications via the South African Broadcasting Corporation (SABC) and with the Department of International Relations and Cooperation (DIRCO) via its trade agreements and cultural tourism on marketing efforts.   

Minister Kubayi-Ngubane said that the inputs and comments by Members were noted. Many questions had been asked. She agreed that the protests did impact upon the brand of SA. Negative reporting did have a negative impact. In Gauteng bookings had been cancelled. Cabinet had sent envoys to countries to mitigate the effects of the negative reporting. Constant work needed to be done on the SA brand. On collaboration with provinces and municipalities, there were South African Local Government Association (SALGA) representatives on the Ministerial Members of Executive Committees (MinMECs). She noted that tourism hardly featured in the local economic development plans of municipalities. The district model was helping. Aggressive marketing was needed for domestic tourism. A festive season campaign for 2019 was planned. Work was being done. Greater elaboration would take place when the team next met with the Committee. People wished to have an authentic experience. Strategic plans and APPs would speak to it.

Mr Darryl Erasmus, Chief Quality Assurance Officer, SAT, stated that on 5 November 2019 the Committee would be briefed on the workings of the TGCSA. He had noted the questions and comments made by members and said that he would address them on the meeting scheduled for 5 November 2019. A comprehensive response would be given.

Ms Amanda Kotze-Nhlapo, Chief Convention Bureau Officer, NDT, said that the Committee could be provided with detail on efforts around small dorpies. She pointed out that two weeks ago a national association strategy was launched. There was a three-year programme for small dorpies to be brought on board to host conferences etc. There was a move from big cities to smaller towns. The smaller towns were assisted with setting up facilities etc. Agreement had been reached with national associations to hold conventions either on a Monday, Tuesday and Wednesday or on a Wednesday, Thursday and Friday so as to link up with weekends. SAT was looking at new ways within which to meet its targets. Work with the AGSA was taking place. She noted the suggestion about a clause to be included in MOUs that could quantify the number of participants on bids.

Mr Dube said that in spite of the AGSA’s findings there were action plans. There was also consequence management. Disciplinary actions had to be comprehensive. SAT was aware of what was expected from accounting authorities in terms of legislation.

Ms Dlamini pointed out that one of the things in the 5-in-5 Strategy was to identify key markets. Key markets were focused on. The issue of golf tournaments was looked at. The main travellers from key markets were millenials from 18-30 years of age. She noted that private sector pricing was a major issue. SAT had engaged with private sector and the Tourism Business Council of SA (TBCSA) on it. She continued that product availability was an issue. There needed to be product diversity. It was about how to approach overseas arrivals. There needed to be partnerships with airlines for one. Good deals would attract tourists. SA was a value for money destination and not a cheap destination.

Mr Themba Khumalo, CMO, SAT, said the realisation should be that tourism was about the economic transformation of SA. He had been with SAT from 2003 – 2006. At that point in time there were no Ipads etc. Today everyone lived in a digital society. SAT needed to transform its marketing efforts for a digital society. It had to keep track of trends. There was a major shift in approach and there was a great deal more of digital marketing orientation. He pointed out that there were six types of tourism that SAT focussed on ie adventure, wild, city, cultural, breath-taking scenery and lastly sun soaked coasts.  SAT held meetings with provincial authorities and with big cities. There was a need for collaboration. SAT would be presenting its Marketing Investment Framework and its Marketing Model to them. When he next appeared before the Committee detail would be provided to Members. He assured that issues raised by members were taken seriously. He agreed that collaborative marketing was important. Partnerships should however be to the advantage of SA. SAT had a proactive collaborative approach.

Ms Kate Rivett-Carnac, SAT Board Member, said that comments by Members were noted. SATs return on investment and its marketing effectiveness had been discussed. Enhanced strategic research was being done. Work was being done by the marketing committee. There needed to be a balancing act between high level objective as outlined in the State of the Nation Address (SONA) 2019 and what was within the control of SAT.

Mr Nadasen said that the team had covered most of the issues. On consequences for irregular expenditure, he said that offenders would be dealt with in appropriate ways. From the audit perspective, SAT did not take its regression lightly. It was not the intention of SAT to present mediocre results to the Committee. He assured the Committee that the CEO matter had not been delayed. Timelines had been looked at. A total of 34 witnesses had been interviewed. It was therefore not a quick process. The process needed to be fair and transparent. There was a wish for SAT and its Board to stabilise as soon as possible. The SAT Board was focused on results that were needed. SAT was accountable to Minister Kubayi-Ngubane, to the Committee and itself. The SAT Board needed to give the SAT team guidance. From a transparency point of view SAT wished to play open cards with the Committee. He thanked the Committee for its guidance.

The Chairperson said that at Robben Island there had been 3000 prisoners whose stories had not been told. All these prisoners’ stories needed to be told. He would speak to the Portfolio Committee on Arts and Culture as it was a Department of Arts and Culture issue. Sports tourism was just as important. These were all elements that should be taken on board in SAT’s 5-in-5 Strategy. Performance Management and Development (PMD) should be looked at around the 56% performance of SAT.

The meeting was adjourned.