Marketing Investment Framework: SAT briefing

Meeting report

Ms Kate Rivett-Carnac South African Tourism (SAT) Board Member said that the briefing would give the Committee an idea of how SAT took marketing decisions.

Briefing on Marketing Investment Framework (MIF)
Ms Bashni Muthaya Chief Strategy Officer, SAT, stated that the MIF was the framework that SAT used to guide its marketing investment choices as it was developed on the philosophy of bringing together targets, market selection and available resources to establish optimal marketing investments.

Members were provided with insight into the key steps that went into developing the MIF. The investment choices into which markets to go into was made by apportioning available budgets across markets that held the most significant value and volume contribution to the South African economy. Global spread was considered to reduce the reliance on any specific region. Considerations for the MIF were the markets tourism potential, SA’s ability to win in the market and the cost of acquisition of a tourist from the market.  All markets in the world were classified across three tiers of travel ie holiday/ Meetings, Incentives, Conferences and Exhibitions (MICE); Visiting Friends and Relatives (VFR) and lastly overall trips which included trips by resellers and traders. Investment choices were then made for the three tiers taking into consideration SAT’s varied role across the different nature of markets. For instance, on holiday and MICE for Europe market choices included Germany, the United Kingdom and Turkey. On VFR in the Asia Pacific Region the United Arab Emirates (UAE) was chosen. On overall trips Malawi and Zambia were chosen in Africa. Markets were prioritised in order of preference in terms of core markets, thereafter strategic markets and of least priority was the rest of the world. Budgets were allocated across the markets in reducing order of attractiveness, to conduct in market activity and to achieve the desired growth. SAT’s budget only managed to cover its work on core markets which serviced a total of 29 countries. On core markets, the focus was firstly on holiday and MICE, thereafter VFR, with overall trips being of least focus. Based on the principles and rigor of the MIF, National Treasury was presented with sufficient motivation to increase SAT’s budget to cover an additional 14 countries within strategic markets.

On the setting of targets for 2020/21 to 2024/25, SAT used Tourism Decision Metrics (TDM) which was developed by Oxford Economics as its forecasting tool. It estimated that SA would receive 16.5m arrivals by 2030 which was 0.74% of global market share assuming all things being equal. The other scenario was the 21m tourists’ target by 2030 set by President Cyril Ramaphosa in his 2019 State of the Nation Address (SONA) which was considered to be the best case scenario as it assumed that the visa regime for SA would improve, especially for India, China, Nigeria and other Africa air markets. Forecast assumptions by Oxford Economics pertaining to SA included that unstable inflation would make SA to be at least three times more expensive than an average destination. It was expected that the rand would depreciate further against the US dollar from R13.2 to R17.2. However, the revenue generated per tourist was most likely to be higher than usual. Although still cheap, SA would be moving towards an expensive destination trajectory compared to other destinations. In closing the Committee was informed that SAT was busy drafting its Strategic Plan 2020/21 to 2024/25 and would be reviewing its marketing investment choices.

Mr Thebe Ikalafeng, Chairperson: Marketing Committee, SAT Board, stated that SAT had a monumental task ahead in attracting 21m tourists to SA by 2030 even though the Oxford Economics forecasted figure only sat at around 16m. SAT had revamped its efforts and was working together with all three spheres of government. Lessons have been learnt from countries like Ethiopia. There was a need for cooperation with departments like the South African Police Services (SAPS) and the Department of Home Affairs (DHA) etc. It was important for SA to remove barriers of travel to the country. There was a need to re-message the story of SA. Crime, budgets and visas were some of the challenges that were there. There were however some low hanging fruits that were there for the taking. He pointed out that the Seychelles had removed its visa requirements. It was something that SA should consider. Why was there a need for persons from African countries coming to SA to have visas? SAT was trying to re-energise the South African brand. By 2020 SAT would have a refocused marketing strategy.

Discussion
Mr H Gumbi (DA) asked what the status of the Joint Marketing Agreements (JMAs) was. SAT was asked whether it worked with Southern African Development Community (SADC) countries/agencies on having joint marketing packages. Marketing could be done together where SA was the gateway to the rest of the SADC countries. He asked whether SAT used international influencers like those found on Instagram in its marketing efforts. To what extent were influencers used by SAT if they were used? SAT was also asked whether at national level it bid for conferences. He also asked in which countries SA dominated as the narrative in terms of being the destination of choice. For instance, in SA people regarded Thailand and Bali as the destinations of choice.

Ms Dlamini replied that joint marketing efforts with SADC countries were not done. The Regional Tourism Organisation of Southern Africa (RETOSA) had not worked. SAT did do bidding at national level. SAT also worked with provincial convention bureaus. The issue was all about collaboration. On countries where SA dominated as a destination of choice, SAT would provide the Committee with a competitive set of those countries. SA’s popularity rating sat at 0.2 which was not where it should be. SA should have a better rating. 

Mr M de Freitas (DA) pointed out that the briefing had not said much about domestic tourism. He presumed that in the MIF there was an element of domestic tourism. Countries that had booming tourism industries had something unique on offer. What was unique about SA? He did not see it being spelled out in the briefing. Slide 2 of the briefing spoke about collaborating with partners and slide 6 mentioned working groups. He asked who SAT’s partners were and how were they chosen. Were important departments to tourism like the Department of Home Affairs (DHA), Department of Transport (DoT) and the South African Police Services (SAPS) included in the list of its partners? He observed that there seemed to be no formal link between the National Department of Tourism (NDT) and SAT with the SAPS when there should be one. In Brazil for instance there were formal ties between its department of tourism and security agencies. On SA’s ability to win in markets (Slide 9), he pointed out that there had to be cooperative relationships. Everyone should work hand in hand and not work in silos. Was it correct that the budget of SAT had been depleted only on efforts in core markets (slide 15)? Nothing had been spoken about SAT working with other departments like the Department of International Relations and Cooperation (DIRCO) on marketing efforts. What was DIRCO doing on promoting SA as destination of choice? Did SAT have formal relationships with departments like DIRCO? He noted that Brand SA had fancy offices in London and had to be taken on board. He asked whether Slide 20 was saying that the President Cyrial Ramphosa’s target of getting 21m tourists to SA by 2030 was most certainly not going to be met. He also pointed out that in Slide 24 it was stated that SA was an expensive destination because the rand was depreciating. He said that one should look at it from another perspective. If the rand was depreciating it made SA more affordable to overseas tourists. SAT was asked how it intended to ensure that tourism sites were maintained.

Ms Dlamini replied that SAT communicated with missions on how they ought to market SA. There was a strong relationship with the DIRCO. Before heads of missions were deployed to missions SAT trained them on how to engage with stakeholders.

Mr G Krumbock (DA) felt that the briefing on the MIF was more of a conceptual briefing. He asked for clarification on slide 12 as he felt the wording did not seem correct. He pointed out that slide 15 only placed emphasis on core markets. He recalled SAT having four markets ie core, investment, tactical and watchlist. Why was the focus now only on core markets? SAT was asked whether it was not investing in strategic or watchlist markets. He noted that the Committee’s predecessor had for five years asked for the survey by Oxford Economics to be done. The issue was that one still did not know what amount should be spent on marketing SA. A figure was needed on what the optimal budget should be. He noted that a pilot project had been done in the Nordic region but no figure was yet available. What was the optimal figure? He was surprised that Angola was not on the list of SAT’s strategic markets. Why was this so? Angola was the hidden jewel of Africa and had a great deal of wealthy people. He felt the first two bullet points on slide 24 were mutually exclusive. He asked SAT to explain. He said that the depreciation of the rand had to be looked at together with the Consumer Price Index (CPI). It would appear as if econometric models were used to determine which markets to invest in. Once the markets to invest in were identified National Treasury was approached to allocate a budget. He suggested that budgets should be fixed based on the number of tourists and not the other way around. SA needed to attract the maximum amount of rands into the country. What should be known was how much should be invested into any market. Tourism was a great tax generator. He reiterated that the optimum budget should be identified first to get the number of tourists from markets into SA and not the other way around as SAT had done. He did not see an analysis having been done on what the budget should be which in turn would determine the number of tourists.

Ms Muthaya conceded that perhaps in slide 12 things were not clearly phrased. She explained that the MIF looked at where opportunities were ie source markets. SAT analysed why tourists came to SA and the percentages given were a breakdown of those who visited for holiday purposes, visiting friends and relatives and coming to SA for any other purpose. Referring to slide 15, she said that there were core markets and strategic markets. In the past SAT had made a distinction between four markets ie core, investment, tactical and watchlist as correctly pointed out by Mr Krumbock. The MIF was essentially a restart and the earlier framework was abandoned. The MIF prioritised the core and strategic markets. SAT’s marketing funds had not been used on the strategic markets. SAT worked with DIRCO on how to activate other markets without investing funds. SAT’s budget had run out at core markets even though opportunities were seen in strategic markets. SAT consequently made a case to National Treasury for additional funds to go into strategic markets. She pointed out that Angola was in SAT’s portfolio. Angola was a source market. She explained that slide 24 spoke to assumptions that underpinned the forecast for SA. The study had been done by Oxford Economics. Oxford Economics used their own forecasting tool. It was a model that Oxford Economics used around the world. It was a relative model. The model looked at SA relative to other destinations. She clarified that relative to other destinations SA would become more expensive. If the exchange rate increased, it would be cheaper for tourists to come to SA but would SA be cheaper relative to other countries? It was not specifically tailored for SA. She would return to the Committee with a formal in depth clarification on what was queried.  

The Chairperson asked with which other countries were SA compared with.

Ms Muthaya said that she could not provide an answer at present as it was not only an economic category that was taken into account.

Mr Krumbock responded that it was not necessarily about countries per se but more about exchange rates and inflation rates in all countries.

Ms Muthaya stated that the point around optimal budget was noted. It was a tricky one. The optimal figure/number was there but the Minister of Tourism and SAT’s Board had not even seen it as yet. What SAT used was the average cost of acquisition. Arguably the figure might be conservative. She noted that there was a whole econometric minefield. SAT had to look at the cost of doing business in a country. Exchange rates had not yet been factored in.

The Chairperson stated that by February 2020 National Treasury should be aware of what funds were needed to achieve the 21m tourists’ target.

Ms Muthaya confirmed the Chairperson to be correct. SAT was going through the processes. The Chairperson had summed things up well.

Ms M Gomba (ANC) agreed that the Committee needed to know how much the marketing budget of SAT should be ie the optimum marketing budget. On the stakeholders that SAT had consulted on the MIF, she observed that Small Medium and Micro Enterprises (SMMEs) were not on the list.

SAT was asked how it linked the MIF with the Committee’s plan of tourism focussing on villages, townships and small dorpies. She felt that the Committee needed to do a follow up. She also felt that crime in SA alone could not be the reason why tourist figures were declining. Crime was also high in the USA but their tourism market was booming. She was concerned that the strategy to market tourism had not included marine tourism. She asked what the approach was. There were opportunities around cruise ships sailing between Cape Town and Durban and between Namibia and Madagascar for instance. She was concerned that SA’s school kids were unaware of SA’s tourist sites. The focus should not only be on international tourists. Local/domestic tourism was also important. A strategy was needed to enable schools to take kids to tourist sites. Church groups travelling between provinces for religious reasons should also be seen as tourists. Tourism structures were needed at ward level. She said that when she had visited Sao Paolo in Brazil at every hotel she was given a free voucher that enabled a taxi to take the tourist to visit a jewellery factory. SAT should put similar things in place. SAT had to use stakeholders to market SA.

Ms Muthaya replied that there were high level consultations. SAT had also consulted with associations like the Tourism Business Council of SA (TBCSA) and the Southern Africa Tourism Services Association (SATSA). There were a huge number of attendees. SAT understood the need to change the status quo.

Ms Sthembiso Dlamini, Acting Chief Executive Officer (CEO), SAT, agreed that stakeholder transformation was important. SAT engaged with provinces. Provinces had to contribute towards product development. As SAT and its Board engaged with trade, there was a need to increase SMME participation. On international platforms where there was a South African stand, there was a requirement that a certain percentage of the exhibitors had to be SMMEs. SAT also had the Tourism Indaba and Meetings Africa platforms where it owned the space and controlled the exhibit. Deliberate work was being done to provide exposure for new players. It was a sad reality that safety and security concerns about SA were a reason for decline in tourist numbers. The issue was about projecting SA in a positive manner. The reality was that the messages that the media put out there was broadcast abroad. The challenge was also around media in market as well. Safety and security concerns were the main reason why tourists did not wish to come to SA. The comment around schools was noted.

Ms L Makhubela-Mashele (ANC) asked how SAT was communicating and mitigating against the negative branding of SA on incidents like the recent grounding of flights by the South African Airways (SAA). The media in SA tend to gravitate towards speaking about bad experiences in SA. What message was SAT putting out there? SAT ought to be all over different types of media countering the negative publicity. Even members of the Committee could do their bit about communicating a more positive message about SA. She stated that it had come to the Committee’s attention that the Auditor General of SA (AGSA) had raised red flags about the Joint Marketing Agreements (JMAs). SAT had consequently withdrawn the JMAs. This could have placed SAT on a back foot when it came to it achieving its targets.  How had SAT mitigated against this? Had SAT come up with new strategies? She pointed out that it seemed as though Brand SA was performing the same functions as SAT but the AGSA had as yet not picked up any issues regarding Brand SA. SAT and Brand SA were the leading marketing agencies for SA. She said that SAT needed to maximise economies of scale. The correct amount of resources had to be allocated in order to get the results that were wanted. She remarked that members seemed to not be too convinced about the MIF. They were sceptical as it would appear as if no results could be seen from efforts being put in. The inputs and outputs should reflect that the MIF was yielding results. She suggested that SAT share with the Committee how it intended to rework the MIF. SAT was asked where it was not meeting targets what new strategies it was putting in place. Was there perhaps something amiss with SAT itself? Could SAT achieve desired outcomes? Was there a need to restructure SAT? She was tempted to say that yes there was a need to relook at the organisational structure of SA. The figures presented to the Committee unfortunately did not reflect achievements.

Ms Dlamini conceded that SAT did have issues around JMAs which the AGSA had raised. SAT had placed a moratorium on JMAs. A new process was in place and National Treasury and the AGSA was on board. The world had shifted towards digital which opened up new channels.

The Chairperson stated that it was important to evaluate SAT’s past performance in terms of the extent to which SAT had informed growth with the strategy that it followed. Like the NDT, SAT too had to work with relevant government departments. The Committee had identified 18 departments that there should be cooperation with. These were the Departments of Education, Transport, Water & Sanitation, Sports & Recreation, Trade & Industry, Finance, Small Business Development, Science &Technology, Communication, Police, Health, Rural Development & Land Reform, Cooperative Governance, Home Affairs, Public Enterprises, Public Works, International Relations and Cooperation, Environmental Affairs and lastly Labour.

The Chairperson asked, from SAT’s perspective, what was the cooperation and linkages with these departments. Perhaps SAT could not perform as it should due to problems with cooperation from departments.

On President Cyril Ramaphosa’s steep target of bringing 21m tourists to SA by 2030, he said that an oversight could be that risks were not factored in. One of the risks could be cooperation from departments. SAT had not spoken to risks that it had encountered. What each department could contribute needed to be specified. He gave the example of Dubai where health tourism was huge. People were flying to Dubai to undergo medical procedures. It showed that their departments of health and tourism were working hand in hand. SAT should not hesitate to tell the Committee that it was not getting cooperation from departments. On stakeholders that had been consulted on the MIF, he pointed out that SA had a challenge of economic skewedity. When SAT sold SA to the world and brought in tourist spending part of the spending was strengthening the status quo. SAT was essentially doing marketing on behalf of the big players in the industry. It was an unavoidable consequence. SAT was inadvertently contributing to the growth of big conglomerates. The issue was about addressing the injustices of the past by fiddling with the status quo. So the bulk of the tourism products being sold were strengthening the status quo. SAT found itself in a catch 22 situation. SAT’s budget should be used to level the playing field. It should not be used to maintain the status quo. He pointed out that in Africa there were eight regional economic blocks and suggested that SAT target specific countries within the blocks.  
He felt that the briefing did not speak to an aggressive inducement strategy. SAT needed to charter into unchartered markets. Why was there no inducement strategy? SAT had to work with National Treasury and Statistics SA on projections. SAT should also focus more on domestic tourism. On the 21m tourists target by 2030 he noted that it was all about projections. He cautioned SAT that over the next ten years there might just be a decline. There were variables that one could not control. SAT should be able to say that if variables presented themselves and that a situation was negative, that the result could be a drop in figures. These types of scenarios had to be factored in at present. For instance, no one knew that the SAA strike would take place. It was just a one week strike but it may take up to three years to recoup what had been lost during the duration of the strike. SAT had to meet with media about relating stories in a better manner. He observed that both the NDT and SAT had never spoken about tourism envoys. He was not too sure how tourism envoys worked with the NDT, SAT and Brand SA on marketing. Tourism envoys were also tasked with marketing SA as a destination. SAT was asked what the risks and advantages of using tourism envoys were. The reality was that tourism envoys had a role to play. He asked who would inform tourism envoys on what they needed to say and do. There might well be conflicts in messages being carried across. He asked that the matter of tourism envoys be brought up with the Minister of Tourism. SAT was also asked whether there was synchronisation with foreign based missions. The briefing had been silent on the matter. He agreed that SAT should rather target value than numbers as Mr Krumbock had stated. The 21m tourists figure had to be translated into a monetary figure in value. He suggested that SAT find a way of communicating the risks associated with the 21m tourists’ target. He emphasised that poverty was embedded in villages, townships and in the periphery of small dorpies. He stated that SAT’s marketing strategies were not consistent with this reality. The issue was about developing villages, townships and small dorpies without dismantling what was already in place. If this was not done, then the migration from rural to urban areas would not stop. SAT was asked what percentage of its budget went towards the marketing of villages, townships and small dorpies. Was SAT the right vehicle to market SA as a destination?

Mr Ikalafeng replied that SAT was working on a comprehensive marketing strategy. There were many questions and issues raised by members and SAT, to a certain extent, may not have all the answers. SAT was dealing with transformation and was driving it. Villages, townships and small dorpies had to be brought into the fold. A rethink was needed. On SAT’s collaboration with other departments it did so through the Ministry of Tourism. He admitted that SAT, in its briefing, should have included information on key risks. SAT had done a comprehensive risk analysis. Domestic tourism was a priority and was important. SAT was in the midst of doing its business plan and marketing strategy. On messaging around issues like the SAA strike, he explained that SAT did not respond to issues. SAT’s primary responsibility was to tell the good story of SA.SAT was in constant engagement with media on how messaging should be done.  

Ms Dlamini, on how to infuse growth domestically and internationally, explained that SAT had a performance dashboard. The performance dashboard would speak to SAT’s performance for the past five years. SAT had also looked at its capability on stakeholder engagement. Stakeholder engagement had to be strengthened but it had to be remembered that SAT had a limited budget. On regional economic blocks in Africa, she said that at the Tourism Indaba and at Meetings Africa there were exhibitors from the continent. In 2018 there had been 19 countries from Africa exhibiting. On achieving the target of 21m tourists and dealing with variables that were there, SAT needed to continue to find a way to do things that they were doing but also needed to unlock growth. SAT did pick up trends. One trend was that young people loved to travel. The comments around tourism envoys were noted and would be taken back to SAT’s principals. She said the value versus volume discussion was a major one. If SAT drove value then it had to cut off certain markets. In addition, SAT would have to do a rethink on how to deal with certain markets. SAT would return to the Committee and debate the matter in depth.   

Mr Darryl Erasmus, Chief Quality Assurance Officer, Tourism Grading Council of SA, said that the Committee was already fully aware of the work that was being done in villages, townships and small dorpies as just weeks before he had briefed it. 

Mr Themba Khumalo, Chief Marketing Officer SAT, said that there were partnership agreements in place. SAT had met with all provincial authorities. He said that to aggregate the South African stay it should happen from the ground up. The stay happened on the ground. It was all about what products and new experiences were at grassroots level. He assured members that work was being done. On safety and security and other perceptions/biases, the media reported on the facts but it also depended on the tone that was used. Media should report on the facts and tone down on the rhetoric of the story. At some point everyone should be called together to have a discussion around the matter. He observed that around the world there was a very clear protocol on responses. It was correct for SAT to wait for government to respond but there was also a need to respond at destination level. It was about a formal institutional response versus a country response. SAT tried its best to collaborate to tell the story of SA. Resources were pooled together. Proudly SA, Brand SA and provinces were on board.

Mr Ikalafeng assured the Committee that its feedback was taken on board and that SAT would get down to work.

Ms Gomba wished to see some sort of instrument to measure how domestic tourism could be increased, whether it was school groups visiting tourist sites or any other locals doing the visiting. SAT had to interact with the Department of Education about the trips to be taken and the permission that was needed.  

Ms Muthaya, on measurement, said that SAT would look into it. SAT had been on a process with Statistics SA to measure domestic tourism. SAT was also considering other sources of data.

The Chairperson said that tourism needed to drive growth in SA. There was however a long way to go. Skewed economic historical imbalances were a threat to the future of SA.

The meeting was adjourned.