Tourism development and job creation support: Federated Hospitality Association of South Africa (Fedhasa) on its activities

Meeting report

Federated Hospitality Association of South Africa (FEDHASA)
The FEDHASA made a presentation to the Committee on its activities in support of tourism development and job creation. The delegation comprised of Mr Eddy Khosa Chairman, Mr Clifford Ross Deputy Chairman, Mr Rob Kycera Chairperson of the Board, Ms Rema Wiese Executive Officer: FEDHASA: Western Cape and Mr Caleb Mabaso Head: Strategic Projects. Even though a PowerPoint presentation had been prepared Mr Khosa chose to speak off the cuff.  He noted that the FEDHASA was responsible to host SA’s guests from overseas. It catered for SA’s society at large to including Members of Parliament. Hospitality was about UBUNTU. It was the African way to be hospitable. However in today’s times it came with a fee. He noted that the FEDHASA was a broad organisation. Seventy five percent of the FEDHASA was made up of big hotel groups. It was formed in October 1949 in Mangaung. The FEDHASA was the oldest association in SA. Major pillars for the FEDHASA were legislation pertaining to labour laws, smoking regulations and immigration laws. Skills development and education was also considered important hence there were close working relationships with higher education institutions, Further Education and Training (FET) colleges and universities. Responsible tourism and environmental sustainability was priority too. The FEDHASA had a responsible tourism programme which covered energy, waste and water management. There was the Imvelo Awards, which were responsible tourism awards for the African hospitality and tourism industries.
Grading of its members was encouraged, and so too was the training of its members’ staff. It also worked with the National Department of Tourism (NDT) on a service excellence project and an educators’ programme to give teachers insight into the hospitality industry. There was also the Food Safety Assessors (FSA) programme. Of great importance was its youth development programme. Education was of utmost importance and the possibility existed that receptionists and waiters in the industry could have diplomas. A major challenge was the newly introduced visa regulations. Its implementation had been extended to June 2015. He did not wish to even consider how business had been lost by the industry from when the visa regulations had been announced to the present. Australia had offered Chinese visitors visas on entry on arrival in Australia. It was a lost opportunity for SA which Australia had taken advantage of. Another concern was Black Economic Empowerment (BEE) conduct sector codes, officially due for implementation in April 2015. He did not think that they were ready to be implemented as yet. A further concern was assistance to Small, Micro and Medium Enterprises (SMMEs). Mr Khosa had thought that when the new Ministry of Small Business had been formed, SMMEs would be assisted. The hospitality industry was a creator of sustainable jobs. New hotels and other establishments were built all the time. The quality of hotel rooms in SA far surpassed hotel rooms around the world. 

Mr Ross noted that occupancy rates in the industry had dropped since the announcement of the visa regulations. Many tour operators had stated that their business from China and India had dropped between 60% and 90%. Some of the issues that scared off visitors were that applications for visas had to be done in person and biometrics had to be done in person as well. He reiterated that Australia had taken advantage of the situation when the visa regulations in SA had been announced. It offered the Chinese and other Eastern visitors visas upon arrival in Australia. Luckily as yet in SA cancellations had not taken place but there had been a drop in bookings. He said that the industry BEE conduct sector codes were supposed to be implemented on 1 April 2015. The FEDHASA had received no indication of how it was supposed to work and what was expected of the FEDHASA. The codes were currently sitting with the Minister of Tourism. He pointed out that there were huge opportunities for small businesses in the industry. The problem with small businesses was cash flow. If they did not get paid then they could not keep their businesses going. Small businesses relied on business from government. Government departments were not sticking to the 30-day payment period. There were hundreds of millions of Rands owing that were well into 90, 120 and 150 days payment periods. The industry would be a good job creator if everybody played their part.

Mr Khosa wished it to be placed on record that the FEDHASA did not support the Kwazulu-Natal Bid Fund Proposal which was introduced by the its Member of Executive Committee (MEC). He was afraid that it would set a precedent to other provinces. If it were to go ahead it should be done through the process of the Tourism Marketing South Africa (TOMSA) Levy. If TOMSA needed reviewing then it could be done.

Discussion
Mr A Whitfield (DA) asked what were the amounts that were outstanding from government departments owing to the FEDHASA’s members. Which were the guilty departments? It was a huge concern and the Committee required the information from the FEDHASA. How many of the FEDHASA’s members were Small, Micro and Medium Enterprises (SMMEs)? He asked whether the FEDHASA charged SMMEs a lower rate of membership fees than its other members. He further asked what the FEDHASA’s efforts were in working with SA Tourism on domestic tourism. 

Mr Khosa stated that the FEDHASA worked with the SA Tourism on domestic tourism. He explained that Mr Ross was the Deputy Chairperson of the Tourism Business Council of SA (TBCSA), which had a forum that interacted with SA Tourism. It was perhaps possible to offer discounts to persons who wished to travel locally. 

Mr G Krumbock (DA) pointed out that the current presentation by the FEDHSA had been thin and generalised compared to presentations that had been made to the Committee in the past. He would have liked to see something meatier. From what was presented he was unable to get an idea of what industry trends were. He asked that something more substantial be provided to the Committee. It was very concerning that because of outstanding payments by government departments tour operators saw a decline of 60% to 90% in business. When SA had announced its visa regulations Australia had been quick to pounce to exploit an opportunity that had presented itself. Australia had announced that China and countries from the East could obtain visas on entry into Australia. The Committee had been informed in a previous meeting that SA’s regulatory environment and its labour laws was the biggest inhibitor of job creation. He asked what interactions FEDHASA had had with government on what the labour law regime had cost SA in job losses. How many people could have been employed? He asked for information to be provided to the Committee.

Mr Khosa noted that legislation could hamper business. In Gauteng an establishment closed for business from 2am to 11am. What would happen if a couple wished to book the establishment for a champagne breakfast wedding? There were limitations on the serving of alcohol at certain times. The ability of businesses to deliver services and generate revenue should not be limited.

Ms S Xego-Sovita (ANC) asked how the FEDHASA was organised and how members accessed their service. What challenges and good practices were there? What type of partnership did the FEDHASA have with the NDT? She asked whether there was a good story to tell on the Youth Talent Programme that it had.

Ms Wiese responded that the FEDHASA had a head office and three regional offices. It had a small staff compliment and members elected its board. Membership was structured in various sectors. Provision was also made for establishments headed by youth. The FEDHASA’s fees were based on the size of the business. Smaller businesses paid lesser fees. The benefit of belonging to the FEDHASA was that it was the voice of the private sector. It assisted members with Commission for Conciliation, Mediation and Arbitration (CCMA) matters, and specialised advice on legislation and labour matters. More tangible benefits would be the discounts that members could get from belonging to the FEDHASA. Any information that the Committee needed would be forwarded. 

Mr Ross added that the tourism and hospitality industry worked closely together. Members of the FEDHASA sat on the boards of Further Education and Training Colleges, hotel schools and universities. The FEDHASA almost had touch points in every aspect of the industry. 

Ms E Masehela (ANC) regarded training as very important. Did the FEDHASA inspect whether the training offered at FET Colleges was in line with what was needed in the industry? There was no doubt that tourism was a job creator but it seemed that employees mostly were paid by means of tips. Were basic salaries paid? Government departments not paying service providers was disappointing and needed to be addressed by the Committee.

Mr Khosa explained that training of staff depended on the organisational structure of the establishment. Each hotel group had its own culture. On how the FEDHASA assisted with training, it offered a Workplace Integrated Learning (WIL) Internship Programme that lasted for 6 months.
The FEDHASA did communicate minimum wages amounts to its members. It was not the function of the FEDHASA to police its members but rather to respect best business practises.
He noted that the FEDHASA was working closely with FET Colleges. It also gave inputs on what skills the industry needed and on what they should offer students.

Mr J Vos (ANC) stated that the Committee should have been given the presentation that FEDHASA had handed out to members. The Committee needed a real analysis of the FEDHASA. He was concerned about room occupancy levels declining because of the impact that the planned visa regulations was having. There was also the 60% to 90% drop in business from China and India for South African tour operators. Given the impact that the visa regulations were having he asked whether the hotel room and occupancy rate could be quantified. The Minister had said that if the visa regulations were having a negative impact on figures then he needed to be shown what real figures were. SA needed to champion biometrics on arrival. It cut down turnaround times and improved security. It did not bode well that the Chief Quality Assurance Officer of the Tourism Grading Council of SA (TGCSA), Ms Thembi Kunene had resigned. Quality assurance was needed. Quality assurance needed to be extended from accommodation to other services as well. What mechanisms did the FEDHASA have in place to ensure that establishments got graded? If there were no mechanisms then what would be put in place. On the training programmes that FEDHASA had what were the real benefits to members of the FEDHASA. What was the benefit for a bed and breakfast establishment for joining the FEDHASA? Tourism was a labour intensive industry and he was aware that labour negotiations were taking place. He asked if the FEDHASA was involved in the negotiations. The Department of Labour had to ensure that there were proper working conditions and minimum wages.

Mr Khosa said that minimum wages were set in the sector. The Department of Labour prescribed what minimum wages for the sector were. The minimum wage changed every year in July. The FEDHASA kept track of it. He wished Ms Kunene well in her future endeavours. The FEDHASA contributed greatly to quality assurance. Quality assurance was a cost that was attached to the business itself. Standards differed from hotel to hotel. What SA needed to do was to align itself with international standards. He did however note that SA’s hotel room standards far surpassed world hotel room standards. On the impact of the visa regulations he said that the FEDHASA would collate information and supply the Committee with it. 

Mr J Esterhuizen (IFP) noted that President Zuma had stated in his State of the Nation Address 2015 that the visa regulations would be looked at. There was apparently a good chance for it to be changed. He would have liked the FEDHASA’s presentation to have more facts and figures. The presentation was light on information. He asked whether FEDHASA had control over the grants provided by the Department of Trade and Industry. On food and safety it was asked if there were any regulations in place to ensure that they were in line with international standards. If FEDHASA represented employers then what did it do for employees? 

Mr Khosa explained that the FEDHASA represented employers and not employees. The Labour Relations Act and the Basic Conditions of Employment Act looked after the interests of employees. The hospitality sector did not experience strikes in a long time and most employees worked in establishments for many years. The FEDHASA had partnered with the NDT to train 100 students from Further Education and Training Colleges to become FSAs. The NDT provided the funding for pilot projects in the Limpopo, Kwazulu-Natal and Mpumalanga Provinces. The students would graduate in June or July of 2015. After the training was complete a hotel would take on FSAs to allow them to do their practical exams. The DTI grants had not taken off as yet and had been shifted to the NDT. He believed the grant would take off soon. 

Mr Whitfield re-asked for information on the breakdown of figures and on outstanding payments by government departments. He felt that the Committee needed to do greater oversight over the SA Tourism as to whether they were marketing SA sufficiently enough. On domestic tourism if the issue was about having bums in beds versus rates charged by establishments what could be done. How a balance could be achieved if rates could not be lowered.

Mr Khosa stated that within the FEDHASA there were members like City Lodge and Tsogo Sun that had different ratings. There were however budget hotels in SA. If a member of the public did not wish to stay in a one or two star hotel then it would be best to avoid high season times like school holidays and Easter holidays etc. The tourism sector had yield management. It was something that South African Airways (SAA) also ascribed to. How best to accommodate domestic travellers? Segments needed to be considered. Hotels could not be expected to give out free rooms. Discussions around the issue needed to be practical. It was a process.

Mr Vos, on domestic tourism, noted two issues. The first was affordability and the second was geographic spread. Affordability was a problem for domestic tourism as everyday South Africans could not afford to travel, pay for accommodation, food etc. Domestic tourism could be marketed and promoted as much as possible but if it was not affordable then it was no use. He heard what Mr Khosa had said that rates could not be dropped for domestic tourism but that it should rather be promoted. He was convinced that the FEDHASA must have discussed the rates issue. What types of discussions had taken place internally? The NDT needed to focus on budget tourism.

The Chairperson emphasised the need to prioritise domestic tourism. She asked the FEDHASA to provide the Committee with the statistics that had been requested.

Mr Ross responded that statistics for the industry were quite scarce. FEDHASA had statistics from a company called STR Global that collected statistics from around the world. The statistics provided information on occupancy rates in five star, four star hotels etc. Through the TBCSA, the FEDHASA was trying to obtain other statistics from tour operators and car rental companies etc.  STR Global’s statistics could be made available to the Committee. The statistics showed that in January 2015 there had been a 4% decline in occupancy. The possibility was that the statistics could show that the decline had continued into February 2015.

The Chairperson asked about the list of government departments with outstanding payments.

Mr Ross said that the FEDHASA had just been through an industry process with National Treasury over the issue. There was six to eight month’s worth of meetings that had taken place. National Treasury would have an indication of what the outstanding amounts by government departments were.

Committee Minutes
Committee Minutes dated 27 February 2015 was adopted without amendment.

The meeting was adjourned.