Tourism Incentive Programme (TIP) to support SMMEs: briefing by National Department of Tourism

Meeting report

Tourism Incentive Programme (TIP)
The National Department of Tourism (NDT) briefed the Committee on its Tourism Incentive Programme. The delegation comprised of Mr Victor Tharage, Acting Director General; Mr Bernhard Meyer, Chief Director: Tourism Incentive Programme; and Ms Petra van Niekerk Parliamentary Liaison Officer: Office of the Director General. Minister Derek Hanekom and Deputy Minister Tokozile Xasa were also in attendance. Both Minister Hanekom and Deputy Minister Xasa made opening statements.

Minister Hanekom said in 2014 when the NDT briefed the Committee on the TIP members were concerned that not enough progress had been made on the TIP. The NDT had gone back to the drawing board and had come up with a revised TIP. The current TIP not only looked different, it was different. The TIP was intended to incentivise certain behaviour. In light of the energy challenge that SA was facing one component of the TIP was to contribute towards a lower demand for electricity. The NDT was going green and clean. A good way to incentivise was to support market access, increase sustainability of enterprises and to have renewable energy. The starting point for the NDT was SA’s urgent need for renewable energy. The TIP would later on focus on better waste management and making establishments more accessible. The intention was to fine-tune the TIP in 2016/17.
 
Deputy Minister Xasa added the TIP was one way that the NDT was using to allow tourism to bring about socio-economic growth. The TIP was a tool to be used to make the tourism industry grow. The pilot phase kicks off in 2015. Areas of focus were to get establishments graded, to assist establishments to enter new markets, to contribute towards renewable energy by retrofitting tourist attractions and finally to get SA to be a more competitive destination by investing in improved facilities at strategic attractions.
 
Mr Meyer continued with the actual briefing and elaborated upon the four focus areas of the pilot phase of the TIP.

Market access support - allowed for reimbursement of certain costs and participation in predetermined international marketing platforms. One of the objectives was to unlock untapped market potential and introduce new players to the market. The targeted enterprises would be small to medium sized inbound tourism enterprises with an annual turnover of less that R35m.

Tourism grading support - On offer was a structure and incremental system of rebates on annual assessment fees paid to the Tourism Grading Council of SA (TGCSA). The objective was for greater conformity to quality standards through wider participation in the tourism grading system. The target audience was the existing TGCSA members including both newly graded establishments and those that renew their grading and membership.

Project sustainability and enhancement - provided for development assistance grants for community-based projects in which the NDT was already involved in such as Social Responsibility Implementation (SRI) projects. Support included skills development and training, management contracts and market access support. There was also development assistance to strengthen iconic attractions such as world heritage sites, national parks and botanical gardens etc.

Energy efficiency pilot - To subsidise the retro-fitment of tourism facilities with renewable energy systems to enhance the visitor experience. The objective was to alleviate pressure on the electricity grid and ensure reliability of electricity supply. The pilot would follow a phased approach starting with state owned destination areas such as world heritage sites, national parks, botanical gardens and SRI projects. For example a 500kW PV mini-grid would be installed at Robben Island to replace the diesel generator currently in use. Subsequent phases involved a staggered subsidy to incentivise retro-fitment by private sector enterprises.

The TIP would kick off with the energy efficiency pilot given the urgent need for renewable energy in SA. Expenditure estimates for the energy efficiency pilot were budget allocations of approximately R180m in 2015/16 and R188m for 2016/17 and 2017/18 respectively.

Discussion
Mr J Vos (DA) was disappointed that the TIP was only presented to the Committee after its launch. The Committee would have liked to have had insight into the TIP prior to its launch. This would have been useful for members to compare the efforts of the TIP with that of the Tourism Enterprise Partnership (TEP). There were many similarities between the TIP and the TEP. There was uncertainty about whether the NDT would continue to fund the TEP. Minister Hanekom had indicated that termination at this stage was not yet definite. The work of the TEP was broad. The Committee had been very supportive of the TEP’s efforts. The Committee needed to understand what the implications were for the future of the TEP. Where did the TEP stand in relation to the TIP? The Committee should be included in deliberations over the matter. Grading was another issue that needed fleshing out. The issue was about voluntary versus mandatory grading. Grading was needed, as quality assurance should take place. Grading should, however, be extended beyond accommodation. The scrapping of grading membership fees should be considered. The basket of benefits on offer to establishments in getting graded was key. Addressing Minister Hanekom, he said that a debate on grading was needed. On the energy efficiency programme under the TIP, custodian departments of facilities should undertake the retrofitting and bear the cost thereof, or at least contribute towards it. For example the Department of Arts and Culture should be responsible for the retrofitting of Robben Island. The TIP should assist with uplifting rural tourism. There was not enough training and skills development in rural areas. A detailed discussion between the NDT and the Committee should take place.

Minister Hanekom stated that the briefing was an introduction of the TIP. It would expand in the future and lessons would be learnt. The NDT had to make a start. It was only one programme of the broader budget of the NDT. The Committee would be kept abreast of how funds would be spent. Regarding the TEP versus the TIP, he said there would be linkages. There would even be linkages with the Expanded Public Works Programme (EPWP). The NDT did various things to support the tourism industry. The focus was on iconic sites but it did not mean that municipal facilities would be excluded.
He recognised the work that the TEP was doing on enterprise support. He conceded that the TIP would not be able to cover all aspects; it would initially reach a few and thereafter reach many more. Small businesses did need support i.e. business plans, management skills etc. The TIP could not provide such business support at present. The TEP was providing the support. In 2016 the TEP would be assessed to check on how well they were providing enterprise support. The NDT needed to decide how to take the enterprise support programme forward and whether the TEP would still be doing enterprise support.

Ms P Adams (ANC) asked if the NDT had considered international best practices in developing the TIP. Had the NDT considered what SA’s competitors like Australia were doing in respect of incentives. Tourism was a concurrent function, was there a chance of duplication, especially between the efforts of the TEP and the TIP? If a total of R40m had been allocated towards SRI support, what the projects were supported?

Minister Hanekom said capacity was sufficient. The NDT was even looking at partnering with the Industrial Development Corporation (IDC). Discussions were still ongoing in terms of the type of technologies intended to be used. Discussion with the Department of Economic Development was ongoing. He had met with Minister Ebrahim Patel. The NDT did not purport to have a solution to the energy crisis in SA. The point was to ensure that establishments in the tourism industry had uninterrupted energy supply. The Committee would be provided with the list of projects that the R40m had been allocated for.

Mr Tharage stated that the TIP was now better capacitated than before. There was a Chief Director in charge and a director would also be appointed. Progress of the TIP would be tracked. There would be lessons learnt regarding capacity used. Market readiness was not necessarily mutually exclusive for the transformation element.

Mr Meyer said that the NDT had looked at international practise.

Mr J Esterhuizen (DA) stressed the importance of members receiving presentation documents before the meeting. R600m for incentive schemes was a great deal of money and much could be done. Renewable energy efforts were good given the energy crisis that SA was facing. However, he felt the presentation was lacking in specifics. Specific figures were needed on what expected achievements, and within what timeframes. He asked whether the Department of Cooperative Governance and Traditional Affairs (COGTA) and the South African Local Government Association (SALGA) were on board. He suggested that perhaps greater incentives should be on offer to encourage establishments to get graded. The Committee needed a joint meeting with the DAC with regard to Robben Island.

Mr Meyer said that it was difficult to estimate the number of jobs to be created. It was possible to measure what had been achieved. On the application process be baseline data would be available. The NDT was working on a draft for monitoring and evaluation. Businesses would be monitored over time. Where there were mistakes they could be corrected. Small businesses needed to have liability cover. 

Mr S Bekwa (ANC) asked what categories of establishments would be supported and what would the criterion be to receive support.
 
Mr Tharage on criteria responded that the NDT would consider an offer that presented SA in a particular way. The National Development Plan and the Growth Path had been taken into account.

Mr A Whitfield (DA) asked what the rationale was in deciding to engage the private sector at a later time than from the outset. Were there job creation targets for each phase of the TIP? R40m was set aside for SRI support; when would the Committee receive the report it had requested from the NDT a while back regarding SRI projects that had failed?

Minister Hanekom responded that the reason why the private sector was to be targeted later had been addressed. The NDT was accountable to the Committee. As the TIP was to be extended to the private sector, smaller enterprises would benefit more than their larger counterparts. Subsidisation would take place. There would also be rebates. Equipment provided would be battery packs, solar panels, and anything else needed for the installation. Retrofitting for persons with disabilities would also take place. The subsidy component for smaller enterprises would be higher than for larger enterprises. Incentives were offered to larger establishments as well. The process would be monitored closely. The private sector would immediately benefit in as far as grading was concerned. There were many anomalies in the Tourism Act that needed to be addressed, some of which related to guides and grading. Amendments would be coming to the Committee in 2016. For the moment sustainability support to rural areas was important.

Mr Tharage said that the number of jobs could not be quantified as yet. There would however be direct and indirect jobs that would be created. The NDT was working with communities in rural areas on SRI projects.

Ms S Xego-Sovita (DA) suggested the guidelines to be developed should be Previously Disadvantaged Individuals (PDI) friendly, and was pleased the NDT had made it possible for persons to apply directly to the TIP.

Mr Meyer welcomed the comment that the guidelines needed to be PDI friendly.

Ms L Makhubele-Mashele (ANC) was unhappy with the manner that the TIP had been presented to the Committee. The Committee was only being briefed after the TIP was already launched. The Committee had requested that Members be presented with a concept paper on the TIP prior to its introduction. R180m was a great deal of money for the TIP’s pilot. Most of the funds were being used to retrofit facilities that had their own energy efficient agendas, now more funds were being afforded to them. The TIP had been wrongly designed for what it was intended to achieve. The Committee should have been briefed as to whether there could be duplication between the activities of the TEP and the TIP. Many of the establishments located in South Africa National Parks (SANParks) were privately owned. Money was being invested in businesses that had funds. How was the ordinary person being assisted? She suggested that the TIP model be relooked at and did not see any tangible benefit in spending the R180m.

Minister Hanekom responded that the TIP was not a retrofitting programme; it had many components. The TIP had been redesigned. Retrofitting of facilities was to cover energy efficiency and to cover universal access for disabled persons. If the NDT could it would spend more than R180m on the retro fitment of facilities.  Private establishments would have to apply and be assessed to check on whether they qualify to be retrofitted. They would also have to apply to check on whether they qualified for rebates on grading. The NDT would proceed with retrofitting and it would work hand in hand with its sister departments. Ms Makhubele-Mashele was referring to the Sabi Sabi Game Reserve located next to the Kruger National Park. The NDT was providing support to its own projects and many of them were in rural areas. The idea was for projects to be energy efficient. World heritage sites each had their own management authority. The NDT would interface with the DAC over Robben Island. At Robben Island the traditional diesel generator used as a power source would be replaced by solar power. The aim was to add value to the site. It was difficult for the NDT to support interventions at all municipalities. There were some projects at municipal level that was being supported by the NDT. The NDT interfaced with departments and all places involved. 

Ms E Masehela (ANC) said that Minister Hanekom had spoken about establishments needing to be disability friendly. The presentation on the TIP had not addressed that. Was there sufficient assessor capacity to grade establishments?

Minister Hanekom was confident that there was sufficient capacity

The Chairperson asked whether the pilot of the TIP would be launched in a big bang.

Mr Meyer stated that there would be a proper awareness campaign. It would be done in all the provinces and would not be a once off. .

Mr Vos felt that the SRI projects were a serious issue. He asked how the choice of Kruger National Park, Robben Island and the Walter Sisulu Botanical Garden for the pilot had been chosen. What was the rationale behind the choice? The Committee should have been briefed about the choice of projects. A helpful tool was the tourism toolkit. One of the National Tourism Sector Strategy (NTSS) strategies was to assist municipalities in changing municipal resorts into budget resorts. Had the Committee been briefed beforehand it could have engaged in dialogue with the NDT.

Ms Makhubele-Mashele was concerned that the focus of the TIP was on existing businesses; that was a disservice to the people of SA. New entrants to the tourism market should have benefited from the TIP; how could 180m be spent without bringing new entrants into the market. Why was the name the TIP, it should have been called the electricity crisis programme.   

Minister Hanekom on the Expanded Public Works Programme projects (EPWP) noted that some projects did not have the element of sustainability built into them. The NDT was placing greater emphasis on scrutinising the business cases of new entrants. New entrants lacked experience. Some EPWP projects were struggling and the NDT would pull out of some. Sustainability support would however continue.

Mr Esterhuizen felt the TIP to be more of a loyalty programme than an incentive programme. New entrants to the market should have been incentivised.

Minister Hanekom remarked that it seemed that most Members of the Committee seemed to be positive about the TIP with the exception of Ms Makhubele-Mashele. The TIP was an incentive programme. Retrofitting was the right thing to do. If need be the TIP model could be relooked at. The TIP was not static, it was unfolding. There was a good chance that National Treasury would be making more funds available. Tourism was a growing sector, which was a view shared by the Minister of Finance. 

Deputy Minister Xasa said the inputs of the Committee were appreciated and its concerns would be addressed. There were communities living around the Kruger National Park and part of the NDT’s sector strategy was to target rural tourism. The TIP had to relate to rural communities as well. On the issue of the TEP versus the TIP, the TEP had been a private sector initiative. The NDT had a three-year contract with the TEP, which was now nearing its end, and discussions on the future of the TEP were ongoing. The issue of grading was also being discussed. Grading was at present still voluntary. The TIP would assist Small, Medium and Micro Enterprises (SMMEs) in various forms.

Committee Minutes
Committee Minutes dated the 6 March 2015 was adopted without amendment.

The Chairperson informed the Committee that the Committee had received approval to attend the Local Government Tourism Conference as well as the Cape Town Jazz Festival.

The meeting was adjourned.