South African Tourism Annual Report 2021/22

Meeting report

South African Tourism (SAT) Annual Report 2021/22

Mr Themba Khumalo, Acting Chief Executive Officer (CEO), SAT, told the Committee that SAT would continue to anchor its programmes and activities around the Tourism Sector       Recovery Plan, with a particular focus on reigniting demand in its domestic, regional, and international source markets. Key initiatives for the year include some of the following: development and rollout of the integrated brand and marketing strategy, continued implementation of the global brand campaign in identified source markets, implementation of the Global Advocacy Programme in partnership with private and public sector stakeholders, hosting of Africa's Travel Indaba 2022 and Meetings Africa 2023, and five national business events to be piloted in villages, townships, and small towns.

On organisational performance, he said the Annual Performance Plan (APP) had a total of 42 targets across the five programmes, for the 2021/22 financial year. In total, nine targets were not achieved and one was partially achieved. These relate to internal controls; business process automation; staff engagement score; number of day trips; brand strength index; business and strategic platforms hosted; and grading of accommodation establishments.

To overcome areas of under-performance, SAT would have an increased focus on overdue actions by sharing quarterly coverage      notifications and elevating stakeholder engagement levels; a new service provider would be appointed in the new financial year to automate the remainder of the       business processes; the South African Tourism would improve planning with provincial tourism authorities to ensure the effective management and implementation of Memorandums of Understanding (MoUs); in the new financial year, an educational drive would be undertaken to assist members with Total Quality in Tourism and create awareness on the importance of quality assurance, including its benefits when it comes graded accommodation establishments. The tender for the brand strength index was re-advertised and is currently being evaluated. The survey would be undertaken in the new fiscal year.

Ms Nombulelo Guliwe, Chief Financial Officer (CFO), SAT, said the overall audit outcome for SAT has improved from a qualified audit opinion with findings, to an unqualified audit opinion in the prior year to an unqualified audit opinion with findings on key compliance with legislation. The SAT has maintained a sound control environment in financial health and human capital. There has been regression in the information technology environment. An analysis of the IT audit outcome indicated management had not formalised processes relating to information technology (IT) governance, which would direct and evaluate the use of IT to support SAT. Irregular expenditure was related to non-compliance with supply chain management (SCM). It was also reported that the total budget was R1.4b and an under-expenditure of R6.6m.

Mr Khumalo said that while there has been significant progress in the organisation's approach to managing compliance and audit matters, there remains room for improvement, particularly in the areas of Information and Communication Technology (ICT) and ICT governance, human capital management, and supply chain management. A lack of approved policies and procedures means management was not effectively and adequately performing processes relating to change management, security management, and user account management.

(Tables and graphs were shown to illustrate human capital management; board engagements; financial performance; and audit outcomes)

Discussion
The Chairperson said some of the information the AG noted was not mentioned in the presentation. The Committee was not excited about the report because SAT accounted for 74% of irregular expenditure in the tourism portfolio. It deals mainly with non-compliance matters, particularly on supply chain, legislation and non-adherence to prescripts. The entity has been inconsistent with getting the information technology (IT) / Information and Communication Technology (ICT) right.

Ms H Winkler (DA) wanted to understand what process was followed in the appointment of the Interim Board, including challenges experienced when there was no Board. She asked what the envisaged role of the Board was between Brand SA and SAT; wanted to know if the failure to conduct survey on the brand index was not compromising the mandate of SAT because the brand index is meant to market SA internally and externally; asked what the AG picked up on in the IT audit outcomes; enquired what was wrong with the Netherlands office because it has always been a re-occurring finding; wanted to find out why there was no representation of Coloureds in the Department; and asked for clarity on the “I Do” campaign because the AG identified a finding related to supply chain management on the final audit report.

The Chairperson asked Members not to ask questions about the Interim Board because its members have not been appointed and the principal heads were not in the meeting to account.

Mr Khumalo said the Department would look at the matter of Coloured representation in its profile. The Department has appointed a general manager for IT because it has not been easy to manage people outside of the organisation. This was why it appointed the Chief Digital Officer and this has led to the replacement of incompetent people with competent ones. This has brought changes to the organisation. During the pandemic, it was difficult to do the survey because of the pandemic regulations and people were not allowed to move around. The survey requires person-to-person contact. This is why the Department resorted to a digital survey approach to assist in moving from a physical to a digital space.

Ms Guliwe said the Netherlands office was not a re-occurring finding. It happened in the previous audit report, but not in the current one, including the boxing event in the Eastern Cape. The “I Do” campaign went through the procurement system. Concerning IT, she said the AG raised issues around internal controls and IT environment. Findings which were identified in the previous year have been closed.

Ms S Maneli (ANC) asked what was being done to fill critical posts for the 16 vacancies; asked if the entity has capacity to develop financial statements with no errors; and asked for feedback on money recovered where there was irregular expenditure.

Mr Khumalo said at the executive level, the Chief Executive Officer (CEO) and Chief Quality Officer positions have been filled. It has now advertised for positions in the nine hubs across the world. Responses have already been received.

Ms Guliwe said when it comes to financial statements, the Department looks at re-occurrence. There was a delay in the fixed register, but errors were corrected before the May submission.

Mr A Matumba (EFF) wanted to find out how the brand was going to be strengthened if surveys for Brand Index were not conducted; asked what the reasons were for applying for condonement on irregular expenditure because of Audit Committee members who were appointed irregularly; asked what the timelines were for the Integrated Brand and Marketing Strategy; asked if the entity has been able to carry out its mandate during the pandemic, and if not, how it was planning to do its work going forward; asked for an explanation on the late delivery of the hosting toolkit; and asked what the entity was planning to do with the Supply Chain Management division to avoid the re-occurrence of non-compliance issues.

Mr Khumalo said during the lockdown, the Department had to keep the sector alive and communicate all Covid-19 protocols to assist the sector in staying open compliantly. When regulations were lifted, it had to start campaigns to promote domestic tourism to keep the sector alive because people were not able to travel externally to support domestic service providers. The Integrated Marketing Strategy would be done in quarter four and work has already started on it.

Ms Guliwe said the entity has an e-procurement system. The internal system fixes all the internal problems. The panel of auditors went through the assessment process, and the key point to note is the 2019/2020 irregular expenditure was R20.3m and had to be reduced. The entity has committed to e-procurement to ensure everything is automated, which in turn ensures the consolidation of scores. This happened in the previous report, but not in the current one.

Mr M De Freitas (DA) wanted to know what the challenges were around the events, especially when it comes to bids, because there was an 87% achievement score; he asked who was responsible for the “I Do” campaign; asked how far the messaging has gone to allay fears internationally regarding SA still being a safe environment for tourism, after the killing of the German tourist; wanted to know why the “Go Life” project was cancelled; asked about the form the investigations were taking, and timelines; asked if the normal bidding processes were followed regarding irregular expenditure issues; and asked how the South African Police Services SAPS has been beefed up because the United States (US) government has issued a warning to its citizens about travelling to SA and, as a result, there were many cancellations.

Mr Khumalo said the Department invited bids to bring events inside the country. It put out a national call to get a bigger representation for the bid, and with time, it was going to improve.

Ms Guliwe said the investigations were listing the value for money received. She also said the “I Do” campaign was not in the Procurement Plan of the Executive at the time.

Ms P Mpushe (ANC) asked about the nature of consequence management, which would be implemented for non-compliance; asked how effective internal controls were to prevent irregular expenditure; asked for clarity on the R34m marketing budget paid for by third parties; and asked for clarity on the R1.5m transaction which was not approved for the Eastern Cape boxing event.

Ms Guliwe said the Department was following Section 57, when it comes to compliance. It made internal departments aware of their responsibilities before going out for procurement. The boxing transaction went through the assessment process. It was waiting for the outcome. The user department signed the contract, and this transaction did not go through the legal and finance processes. It was why no money had been spent on the transaction.

On the Audit Action Plan, she said the Department could map the findings and then reconcile them for the Executive and track the document quarterly. It is then presented to the Executive, and Audit Committee. She said it was closing its audit findings.

Mr F Jacobs (ANC) said he liked the advertisements produced for marketing SA, even during the pandemic. These were the types of things SA needs. The advertisements painted a positive picture of SA. He wanted to understand why the township and small towns indaba was not done now, because marketing campaigns must talk bout the best small towns and townships for tourism. He also asked if the entity has a Chief Tourism Officer, and if the entity is the central tourism intelligence.

Mr Khumalo said the tourism campaign was nominated for the advertising Loerie Awards. Shot’ Left has been a successful campaign and banks are now using this idea as well. The marketing campaigns which have been employed have been very successful up to now.

The Chairperson said there had been no positive reflection from the Auditor-General (AG) on the Brand Straight Index. She asked for details on the cancellation of the tender to carry out the survey, because the entity has a responsibility to market the country. The Chairperson asked the entity how far it was with re-imagining domestic tourism, because there were many good presentations at the Tourism Indaba held in Durban. She said domestic tourism contributed immensely to the gross domestic product (GDP) in China, more than the international one; and she asked the MOU to be tabled before the Committee, because it was about the details.

Mr Khumalo said the work it was doing with the provinces through the MOU’s was there to ensure the Department drove domestic tourism. This was being done every year. During quarter one, there was work done with the SA Bonsai Association in the Western Cape. Tzaneen and George were on the list to follow going forward.

The Chairperson asked the entity to explain why it had an Acting Company Secretary, and who was supposed to preside over this function, because it appears the Chief Operating Officer (COO), Ms Nomasonto Ndlovu, was occupying two positions. She wanted to know what safety measures have been considered for Route Access Markets from outside the borders of the country visiting Kruger National Park, as the Committee interacted with Intercape Bus Service, because it was experiencing attacks from taxi associations.

Mr Khumalo explained the Acting Company Secretary was appointed by the Board. The organisation has a Chief Marketing Officer and Chief Operating Officer. This happened during the time when there was no Board, and somebody had to act in place of the Board. An Acting Chief Marketing officer had to be appointed, but now there has been an Interim Board, and the matter must be rectified. Issues of safety fall outside the mandate of the Department of Tourism. There is a global Advocacy Programme allowing engagement with different stakeholders to address tourism activities and influence the operating environment, like SAPS.

Mr Matumba wanted to know if there had been progress from the approach the entity had to manage controls and non-compliance, versus the message of the AG saying there were inadequate controls for non-compliance. It was not acceptable for the entity to be found wanting on IT because the world is in the Fourth Industrial Revolution, and IT is at the centre of everything. Everything is done via an app these days. Advertisements must speak to everyone. SAT must watch how the USA advertises itself. He asked the Committee to ask political heads to appear before the Committee to answer questions about the Interim Board, because there was no political will to make the managers do the work and there were no political heads in the meeting.

Ms Winkler said it appeared SAT was not doing anything about the killed German tourist and kidnapped Ukrainian tourist in SA. The US has issued warnings to its citizens about travelling to SA. Tourism has declined by 82% in Durban. All the beaches were closed because of the collapsed sewerage infrastructure, and she asked what SAT and Brand SA was doing with places like Durban. She asked why the AG did not pick up the finding on the transference of the Brand Tourism survey to a digital platform; she asked who was in charge of the digital platform; and wanted to find out why SA was not embracing the digital nomad visas, as the country has so much to offer, and these nomad visas were allowed in Namibia.

Mr Khumalo said SAT had to manage the message regarding the killed German tourist. The COO was dispatched to Mpumalanga to manage the incident proactively. He said the sentiment survey was not a replacement of the Brand Survey. There was a need to have a substitute for the Brand Index Survey which, by its very nature, required physical movement and person-to-person contact. It had nothing to do with the AG.

Adv Cawekazi Mahlati, Interim Chairperson of the SAT Board, said SAT was not responsible for Safety and Security. It was better for the Committee to engage with counterparts in the Safety and Security cluster. The entity asked the Department to engage with the Safety and Security cluster to adopt the world’s best practices around the matter, and stop giving out statistics on the killing of tourists because nothing was said about the death and horrors in other countries.

Ms Mpushe asked the entity to send detailed reports to the Committee on five national business events to be piloted.

Adv Mahlathi said he acknowledged the matters raised by members in the meeting. He told the Committee he took over from 1 September 2022, and he was busy setting up sub-committee meetings. A fully-fledged board meeting would be held soon and would bring up all the matters raised by the Committee around IT, and proposals from the Audit Committee on how to improve on ICT. He told the Committee a chartered accountant has been appointed to the Interim Board and is sitting in the Risk and Audit committee. Mr Zakwe was the returning member of the Board and alerted the new structure about the matters the Committee has been raising over the years.

The Chairperson told Adv Mahlathi not to echo incorrect statements that he heard from his principals. Practices in other countries might not be the same as in South Africa because practices are designed to suit particular countries. The Department of Tourism has established a Tourism Monitors Programme which needs to be enhanced. Even if there were three incidents involving tourists, crime cannot be quantified. It is not acceptable. She acknowledged the Board was one month old. Every day counts, and the Chairperson advised Advocate Mahlathi not to allow vacuums, because it was compromising. The Company Secretary should have been appointed a long time ago. She warned that if his principals put more people in the interim structure, the Board could remain interim for the next five years. She agreed with Mr Matumba regarding political heads who should appear before the Committee to answer questions about the Interim Board. The merger of Brand SA and SAT could only be answered by the political heads. The White Paper review was another matter which needed to be interrogated, especially critical matters of transformation, which certain groups in the sector did not entertain. The sooner the entity was lobbying the Portfolio Committee on these matters, the better, because the members were lawmakers and policy-makers.

Ms Winkler wanted to understand what was going to be done, because the collapse of infrastructure was making it hard to market domestic tourism.

Mr Khumalo said the matter did not fall under the Department’s mandate, but it does engage with its counterparts to get its views across.

The Chairperson said Members interrogate with the intention of seeing improvements. It is also intended to assist the entity where the entity needs assistance most. When the entity appears before the Committee again, the Chairperson advised it should not run away from the Netherlands office matters, because, for many years, the entity has always avoided responding to questions about it. The Committee wants to know if it was really needed, as there was always a budget for it. It was better for the entity to speak with ambassadors in this region, so its budget could be used to market SA.

The meeting was adjourned.