South African Tourism on its 2015/16 Annual Report

Meeting report

Apologies were extended to the Committee by Minister of Tourism Mr Derek Hanekom, Deputy Minister of Tourism Ms Tokozile Xasa and South African Tourism Board Chairperson Ms Tania Abrahamse.

Briefing by the South African Tourism (SAT) on its 2015/16 Annual Report
The delegation comprised of Mr Graham Wood SAT Board Member, Mr Sisa Ntshona Chief Executive Officer (CEO), Ms Sthembiso Dlamini Chief Operating Officer (COO) and Ms Nombleleo Guliwe Finance Manager. Mr Wood said that Mr Ntshona had only recently in October 2016 joined the SAT. The SAT had however obtained its 15th unqualified audit report.

Mr Ntshona confirmed that it was indeed his first presentation to the Committee. He at the outset contextualised the 2015/16 financial year by stating that it had been a difficult year for Africa as a whole. There was a wide array of macro issues that had to be dealt with. Some was within the control of the SAT whilst others were not. For example there was the outbreak of Ebola in West Africa. SAT also had its work cut out as SA had to compete for tourists with countries like Egypt, Morocco and Kenya. There were also the misunderstandings over SA’s visa regime that caused a diversion of tourists to other countries. The intention of the visa regulations had been good but it had unintended consequences. Embassies in countries like India struggled to process visa applications and Nigeria for instance only processed 250 visa applications per day. The good news was that in the current financial year 2016/17 tourism saw growth across the board. Tourism growth worldwide was 4% however growth in SA was much higher. He continued with the actual briefing and in the interests of time he would only highlight certain slides. The Committee was provided with an overview of the performance of SAT for 2015/16. With the performance indicator being the number of international tourist arrivals achieved the planned target for 2015/16 had been to have 10.19m tourist arrivals the actual achievement sat only at 8.9m. There was a deviation of -18.9%. Some of the reasons for the under-performance were due to the aforementioned reasons given ie outbreak of Ebola, visa processing constraints, some of SA’s source markets being in recession as well as negative news about global safety and security. Actions taken to improve international arrivals included the amendment of the immigration regulations, improved airlift strategy and the implementation of the SAT enhanced growth strategy. On domestic tourism with the performance indicator being the number of holiday trips achieved the planned target for 2015/16 had been 2.8m. The actual achievement sat at 2.7m. There was a deviation of -5%. The target had not been achieved due to SA’s poor economic growth and due to many South Africans not having a culture of taking holiday trips. Actions taken to address the shortfall was that SAT undertook a domestic target market segment refresh exercise to inform a more robust domestic marketing strategy  as well as embarking on programmes that would seek to create a culture of travel in SA. On total revenue achieved the planned target was R107.4bn however actual achievement only sat at R91.7bn.On  boosting revenue SAT was undertaking its sixth revue of its leisure tourism market portfolio in 2016/17 and implementing it from 2017/18 to 2019/20 coupled with an investment model to maximise return on investment. In the year under review the Tourism Grading Council of SA (TGCSA) did not meet its annual target of 6 493 graded establishments by the end of March 2016. There was however considerable growth in new establishments joining the system as well as in the number of graded rooms. Of the 5 230 graded properties achieved 755 were newly graded establishments and the remaining 4 475 were renewals. The South African National Conventions Bureau (SANCB) in 2015/16 had submitted a total of 53 bids. It had won 3 and lost 3. SAT was awaiting the outcome of the remaining 47 bids. The Committee was also provided with governance and human resource information of SAT. Members were additionally provided with a breakdown of the financial performance of SAT for 2015/16. SAT was proud of maintaining its clean audit status as reported by the Auditor-General of SA. The audited financial results showed an operating deficit of R46.7m which was fully offset by unrealised foreign exchange gains of R62.3m. The audited surplus for 2015/16 was thus R15.6m. 

Discussion
Mr J Londt (DA, Western Cape) referring to the explanation given by the SAT on slide 18 on figures for transit visitors versus visitors who stayed over for more than 24 hours asked whether SAT had plans in place to encourage the figures for the latter to increase. He also asked what the transit visitor figures for 2014/15 versus 2015/16 were.  What was SAT‘s success rate on winning international bids? He asked what the reasons were for SAT losing bids. He emphasised the importance of getting rail travel in SA back to where it should be. Visitors should be encouraged to use trains and in so doing visit small towns. He was aware that upgrading rail infrastructure required a huge capital investment. He felt that the Department of Transport needed to come on board. He hoped that SAT used South African Airways (SAA) when it travelled.

Mr Ntshona stated that SAT did not have granular figures on transit visitors. Figures had just been lumped together. On attracting transit visitors he said that perhaps they needed to be identified and that day visas should be given to them. The issue needed to be discussed with the National Department of Tourism (NDT) and the Department of Home Affairs (DHA). On international bidding he noted that there were long lead times. He would provide particulars the next time he appeared before the Committee. He agreed that on rail the Department of Transport should be approached and he would do so through the NDT. As a matter of interest he said that on visitor figures for the Blue Train the Japanese topped the list. 

Mr Wood said that SAT did use SAA and travelled economy class. SAT went for the cheapest rate that would allow them to arrive at their destination on time.

Mr Ntshona added that SAT was negotiating with SAA and would report on it to the Committee.

Ms Dlamini stated that SAA remained a strategic partner and played an important role. She explained that bidding was an expensive exercise. Even hosting a convention was expensive. In order for SA to be competitive SAT needed a bid support fund. National Treasury fortunately was listening to SAT’s pleas in this regard. 

Mr B Nthebe (ANC, North West) said that members had in the past stated that the less visited provinces should have their competitive advantage offerings highlighted. However the reality was that already booming provinces were still being concentrated on. He said that the North West Province did have nature reserves but the problem was around security. He was aware that security fell outside the domain of SAT but that it could perhaps approach one of its role-players to look into the matter.

Mr M Khawula (IFP, Kwa-Zulu Natal) referred to slides 18 and 19 which spoke to non achievements of SAT on domestic tourism targets. He was not convinced about SAT’s explanation that one of the reasons for low domestic tourism figures was due to South Africans lacking a culture of taking holiday trips. Could it be that provinces and cities were not marketing themselves properly hence people were not travelling? If SAT was having discussions with the Department of International Relations and Cooperation (DIRCO) on the use of its 124 missions to market SA abroad, he asked what the current situation at present was. On the different source markets for SA’s tourists he would have thought the Brazil, Russia, India, China, SA (BRICS) countries to have made up the majority of tourist figures to SA. Slide 27 spoke about Africa being a major long haul source of tourists to SA However when it came to economic spinoffs emanating from Africa figures told a different story. He noted that the figures from SAT told an interesting story. The figures showed that tourist figures to SA had been affected by the visa regulation issue however when the Committee had asked the Department of Home Affairs whether the issue had affected tourism the answer received had been in the negative.

Mr Ntshona stated that the lack of a culture of travel in SA was a challenge due to the tough economic environment that prevailed. Efforts should however continuously be made to instil a culture of travel. SAT needed to take time to understand its target experience. What would get people travelling? SAT was targeting various groups like students, the elderly etc to encourage a culture of travel. He noted that SAT went to various provinces to find out what events they had in order to market them globally. The alignment of different spheres of government on tourism was a challenge but there would be better coordination. SAT also reached out to the private sector. He said that he had attended a function where heads of missions had gathered. President Jacob Zuma had opened the meeting. Statements were made that the aims of embassies was to promote trade. SAT was negotiating a framework where it could supply embassies with figures. SAT also provided support to embassies. The aim of working with South African embassies was to save costs and hence discussions were taking place.

Mr Wood explained that the reason why arrivals from BRICS countries were so low was due to the visa regulations in 2014/15. India and China were hugely affected as applications had to be made in person. However with the recent relaxations on visas, figures from China and India had increased.

The Chairperson noted that some of the issues raised would be addressed in the Foreign Services Bill.

Mr L Magwebu (DA, Eastern Cape) appreciated the good work that SAT was doing. He felt that the Eastern Cape was a beautiful province and it was also the home of legends. Tourism in the Eastern Cape was lacking and SAT was asked what the problem was. He felt that the Eastern Cape had so much to offer. He asked what SAT was doing on township tourism especially in the Eastern Cape.SAT was asked whether it could not put incentives in place for provinces that were not performing well on tourism.

Mr M Chabangu (EFF, Free State) was pleased that SAT had obtained a clean audit. He pointed out that the town of Clarence was part of the Golden Gate and was a huge tourist attraction. It featured many bed and breakfasts. He was however concerned that there were no bed and breakfasts in a nearby township. He asked whether South Africans were not travelling because they had safety and security concerns. SAT was asked how many visas they supplied. He pointed out that Freedom Park was a white elephant like many other places and needed to be revitalised. 

Ms M Dikgale (ANC, Limpopo) commended SAT for the good work that it was doing. She asked why there was not a air flight from Polokwane to Cape Town. Given the decline in arrivals to SA she asked what plans SAT had to improve things.

Mr Y Vawda (EFF, Mpumalanga) said that he would like to see a paradigm shift in thinking. People did not visit SA for holiday and leisure purposes only. There were many reasons why persons came to SA. One of the most common reasons persons came to SA was for business purposes. There were also other reasons why people visited SA and these needed to be explored and exploited.  On grading he did not feel that it should be made compulsory. There were establishments that did not wish to be graded or simply could not afford to be graded.  Referring to SAA he felt that the national carrier needed an exercise in public relations. He felt that embassies should have been roped in a long time ago on marketing SA. He asked why the Japanese visitor figures to SA were so low. He emphasised that halaal tourism held huge potential and that in 2012 spend on it amounted to $20bn. By 2020 this figure was expected to increase to $200bn. He was pleased that Emirates Airlines had increased flights to SA. He asked why SAT had lost three international bids. If smaller conventions were being considered what capacity were they expected to have?

Mr Ntshona confirmed that SAT had lost three bids. He said that bids in the end came down to the amount of funds that one had available.

The Chairperson pointed out that members had not asked any questions on the financials of SAT. The budget of SAT was around R1.2bn. However SAT had over-expenditure of R82.6m. The largest part of the over-expenditure amounted to R42m which was for marketing awareness.

Committee Minutes
Committee Minutes dated the 30 November 2016 was adopted as amended and minutes dated the 1 February 2017 was adopted unamended.

The meeting was adjourned.