South African Tourism 2019/20 Quarter 4 performance

Meeting report

The Chairperson opened the virtual meeting, welcoming the Members, Committee support staff and the South African Tourism delegation. He introduced the meeting agenda and then handed over to the Committee Secretary to announce the apologies received.

The Committee Secretary, Mr Jerry Boltina, put forward the apologies from the Minister and Deputy Minister. The Minister, Ms Mmamoloko Kubayi-Ngubane, was said to have had another engagement while the Deputy Minister, Mr Amos Mahlalela, was attending another departmental meeting.

The Committee Chairperson handed over to the chairperson of the South African Tourism Board.

Chairperson of the Board’s opening remarks

The Chairperson of the board South African Tourism, Mr Siyabonga Dube, provided the context of the period of the report, stating that it was reporting on the period of January to March of 2020. During that period, Covid-19 had already started affecting a lot of the countries which led to the closing down of countries and restrictions in movement. Tourism was affected as it was labelled as one of the causes for the spread of the coronavirus. Before South Africa had their first Covid-19 case, they were affected by the international market which saw events such the Internationale Tourismus Bors (ITB) being cancelled. The Indaba event by the SAT was also cancelled. He stated that Covid-19 was a new experience and was not an anticipated risk during the planning stages in the previous year. When the lockdown was announced in March, the period had already been affected by a number of cancellations from the tourism that was inbound, partly due to the other countries’ lockdown restrictions. He remarked that the presentation was of a mixed bag of results. However, part of the plan was going to start domestically, then regional and then internationally. While the sector had been badly affected by the pandemic, he expressed hope that the sector would recover quickly given its nature as a sector with fairly low barriers to entry compared to other sectors.

South African Tourism (SAT) Quarter Four Performance Report

The CEO, Mr Sisa Ntshona, said that the report gave a bit of a sense of the annual results. In the fourth quarter the SAT started to see the global results of how tourism slowed down. Globally, tourism was down 22% and this was during the first waves of the coronavirus in Asia, Europe and the United States. South Africa (SA) experienced a decline of 10% in arrivals relative to the same period in the last year. Compared to the global decline, SA did better. SA was one of the last countries to experience the first wave.

The Key Performance Indicators (KPIs) were structured into five programmes and under each programme there were other sets of KPIs. In total there were 37 KPIs within SA Tourism for the period under review. Through his presentation he highlighted the KPIs that were in red. Out of the 37 KPIs, 20 were achieved, 13 were not achieved and four made significant progress. The KPIs that were not achieved were directly linked to international arrivals into the country.

The percentage vacancy rate target was not achieved. The target the entity had set was to fill as many of the vacancies as possible. The problem it faced was filling the vacancies in its international offices, specifically in France as there were labour issues and a new hub manager had to be appointed. The delays were what caused the failure to achieve the target.

The BEE level target of level four was not achieved. He highlighted that he would be giving attention to this area going forward, as it had previously not been allocated to a specific unit in the organisation.

He highlighted that although the performance was sometimes missed in the quarter it was sometimes a timing issue and was then made up for in the following quarter. When looking at the performance for the whole year, it might be found that the performance had been achieved.

The performance was directly linked to the slowdown of international tourism activity. The SAT had a target of receiving three million visitors but only received 2.4 million were received during the quarter. This was a disappointing result as quarter four was usually the country’s peak season. It also impacted the Total Tourist Foreign Direct Spend (TTFDS).

There was a 17% decline in the percentage of geographic spread of international tourists because as less people arrived in the country, there were fewer opportunities to have geographical spread in the nine provinces of the country. However, the SAT had been working with the provinces, driving and ensuring that there could be tourists across the nine provinces.

In terms of the South African brand, he explained that at times, incidents that were beyond the entity’s control impacted the brand. In the fourth quarter, incidents such as xenophobic attacks put pressure on the positivity of the brand.

The reach of domestic campaign declined during the quarter. However, when looking at the net effect, the target was reached. This was linked to the travel week activities that the entity was driving.

The Seasonality Index of domestic tourists declined by 30%. This index was important as the entity wanted to ensure that tourism activities were not just seasonal but happened throughout the year. During this quarter, the travel disruption impacted the index.

SME participation for all SAT hosting activities declined by 44%. This was impacted by the cancellation of the Internationale Tourismus Borse (ITB) as the entity missed out on the opportunity to take the SMEs to this platform.

The number of qualified leads generated spoke to the entity’s business events space, MICE activity. In terms of the first impact of Covid 19, the MICE space was impacted the most. There were postponements and cancellation of events on a large scale. This resulted in a five percent decline during the quarter. There was a decline of 40% in the numbers of meetings held at Meetings Africa. Going forward, the hybrid of physical presence and also virtual meetings would assist in future engagements.

The number of international tourism market access platforms, where SAT participated, declined by 50%; this was also attributed to the cancellation of ITB.

In terms of grading, it was highlighted that this was an area in which there had been significant under achievement of targets. The Ministry had been reviewing the grading Act and would be producing a white paper on it. Questions were still being asked about the future of grading on whether it should be voluntary or compulsory, amongst other things. There was significant work being done in the highest levels with regards to grading.

The number of officials and frontline staff that attended the welcoming meeting was part of an initiative by SAT to have as many tourism ambassadors across the country. During the quarter there was no movement at all due to the lockdown restrictions in place. Going forward, there would be virtual training as opposed to physical presence.

Finance

Ms Nombulelo Guliwe, SAT Chief Financial Officer (CFO), presented the financial performance of the SAT for the quarter. In 2019/2020, the SAT recognised total revenue of R 1.5 billion which was a mainly made up of the transfer from Department of Tourism. The second biggest line item was the amount received from the Tourist Business Council of South Africa (TBCSA), which accounted for R133 million of the total revenue.

The balance of the revenue line items were attributed to the exhibition income, grading revenue and sundry revenue. The biggest allocation of funds went to programme three, which was leisure tourism marketing.

Discussion

Mr T Khalipha (ANC) remarked that it was a difficult time to check the work done by the board given the challenges facing the tourism sector. He stated that he believed that the board had tried to implement its mandate. Acknowledging that it would not be an easy task given the challenges faced by the economy and those faced by the sector, he asked how time lost would be recovered as result of what had happened in the country in light of the pandemic. Secondly, how does the board plan to assist the small industry, as he stated that it was the Committee’s objective? How is the board planning to assist the rural areas and small towns? During this period these areas had made huge losses and it was not going to be easy for them to recover.

Mr G Krumbock (DA) acknowledged the point that many factors, such as brand positivity, were affected by incidents that SAT could not control – such as xenophobia; one thus had to give a little bit of flexibility and allowance to SAT. His questions were in reference to the financial report, as the presentation had highlighted that income from grading levies was about R 23 million out of a total of R1.5 billion, which was about was 1.5% of the total income of SAT. He stated that this illustrated that it surely could not be an argument anymore that grading should be compulsory but free because absorbing that from the rest of the budget should be relatively simple. The benefits of having a credible tourism offering overseas from having establishments graded and, as a result, no brand damage on trip advisor or any other form of social media, would significantly outweigh the picking up of the cost of that 1.5%. He asked if the board could comment if that was its thinking and asked when the board thought this issue would be resolved.

What is the SAT’s view on what the targets should be for international arrivals, heading into the first quarter of 2021/2022 and perhaps the last quarter of this financial year? Is the SAT looking at a more positive scenario in which their targets would be resumed or are they budgeting and planning for reduced targets, accounting for the Covid-19 pandemic? To what extent will there be scenario planning? If the entity was budgeting and planning for reduced target, what does it think the decline in percentage targets would be? He asked if the SAT could give the Committee an idea of the increases in international tourism against the pre-Covid scenario planning were going to be and to what extent that was a result of Covid-19.

Mr P Moteka (EFF) acknowledged the board chairperson’s opening remarks that the fourth quarter was affected by Covid-19. He asked what exactly the board was going to do to empower women in tourism, especially those in the villages, townships and small towns; he also referred to a previous meeting in which women talked about not getting enough help. He agreed that Covid-19 had affected tourism in a huge way but stated that some of the results were contradicting what they all understood about the effects of Covid, especially the 2.4 million target achievement out of 3 million – which he said was close to the target. Given that Covid started in December 2019 and January, February and March were affected, he asked for clarity on how the entity managed to get those figures, given that international tourism was shut down. He further asked if the targets were realistic, given that even under these circumstances the entity could achieve close to the target.

He remarked that the graded establishment target was not achieved, stating that the entity should do away with the costs as people could not afford the costs.

Mr H Gumbi (DA) referred to the comment made by Mr Dube. He asked if the SAT would open up in October as per the positive forecast. How many tourists could be anticipated and how many jobs can you forecast? He referenced the closure announcement of STA Travel and stated that with major players such as this, it was a concern for small players that did not have the resources such as those of companies like STA Travel. With regards to MICE, what does the SAT think the country should do to position itself in the world as the events venue?

He expressed that he was glad that there was some step being made around grading and hoped that the Minister was taking the line across political parties that said that grading should be compulsory and free, as a stepping stone henceforth.

Mr K Sithole (IFP) asked if the SAT had any programme that would assist the local tourists in different areas like rural areas and if it had any linkage and programme that talked to provinces and assisted them.

Ms M Gomba (ANC) referred the grading issue and asked how many businesses pulled out from the grading scheme and the reasons cited for pulling out from grading. She also referenced previous discussions about reviewing grading policy and thus wanted to know how far the SAT was with regards to that. She expressed that she hoped that there would be different categories to grading establishments, particularly those that were cultural accommodations so they could be graded according to their categories.

Mr M De Freitas (DA) referred to the problem that the SAT had in the France office and asked how the entity ensured that what needed to be done in the offices abroad were done and also ensure that targets were met.

Ms L Makhubela-Mashele (ANC) said that given that the responsibility of the SAT was to promote South Africa as destination of choice, how much of the budget is allocated to ensure that South Africans explore their own country and consume the tourism products? By doing so, it would ensure that the tourism products would be sustained and citizens would get to experience their own country. She asked the CEO if he could present the strategy and the percentage of the budget that would be used to promote South African tourism domestically.

The Committee Chairperson referred to the grading requirement and expressed that it had been agreed upon by the Committee that the requirement needed to be made available to entrepreneurs free of charge. Going forward, it would be better if it was done by government so that when the facilities were used, people could be satisfied that the quality was approved in line with the grading that would have been done by government. He suggested that the white paper processes be hybridised by pursuing the white paper process while also introducing some interim measures that would ensure that grading almost began immediately, in efforts of assisting small businesses to survive the immediate post-Corona situation.

He expressed that he wished that the reports would have indicated a scenario that all things being equal, what would have been the impact on people who were in the villages and townships, small towns, in as far as putting them in the mainstream economy within the tourism sector. This, in order to ascertain what would have been the benefits accrued to them if they were in the tourism sector had it not been for the Corona pandemic.

In terms of risk, he stated that it would be important for the tourism sector, going forward, to look at risk in a way that it would enable them to plan for any scenario that they may face. It was not known what would happen after the Corona pandemic. However, research could be done to see the possible paths of success so that they would be able to get closer to their targets.

Responses

Mr Dube addressed the issue of practical plans for recovery. He referred to a previous meeting in which the board presented its revised Annual Performance Plan (APP). The APP was premised on about three pillars, one of which was the activities that they were going to do to reignite demand and to deal with issues of supply as well as building the SAT’s internal capacity so that once the industry opened once again, the entity would then able to execute the plans that were outlined to support the recovery of the sector going forward.

There was close collaboration with the provincial authorities, not only at an executive committee level. The board had engaged with the entity’s provincial colleagues with the aim to attempt to do joint planning and activities so that they could support each other as they were looking to diversify the product and transform the industry. They had agreed that they needed to schedule those meetings on a quarterly basis.

Ms Guliwe addressed the question regarding the focus area and how much the entity was projecting to plan from a demand creation perspective. Together with the brand and marketing team, the entity had started working on different activities that would drive demand. They had not concluded on the percentage but it was roughly around 10% of the revised budget that the entity currently had to use for the quarter to create demand.

Ms Sthembiso Dlamini, COO, SAT, addressed the question regarding the offices abroad. Every office or any region that they have has a target. The overall target that was in the APP of the organisation was allocated to the offices as part of their targets. She highlighted that following the organisational planning process, each and every regional business unit was required to deliver a business plan that would give the executive a sense of what were some of the initiatives that they were going to do, to assist in achieving the overall targets. They also had quarterly performance reviews, which were checked by the CEO, where each and every business unit presented the progress made against the business plan and targets set. In those meetings, they identify what the risks and barriers were to be addressed with regards to performance. The offices abroad were headed by a South African hub-head who worked with a locally recruited team.

With regards to the issue of incorporation of villages, small towns and townships she stated that the entity was collaborating with provinces to conduct an audit on what were the attractions and experiences that were in the country. One of the things that were done with the provinces was having a discussion with them, that provinces should be involved with identifying some of the rural products and experiences within their provinces. This was important so that if they were going to create market access to the products that were located in the rural areas, those who were selling the destination could access the information on where these products and experiences could be found. They also wanted the travellers to have direct access to these products and experiences. She said that they had to make sure that the issues of quality were taken care of. They had to standardise the quality of products and services that were provided whether they were located in a township, a village or small town. They wanted to work on enhancing the skills on services particularly on tourism service skills. She expressed that she believed that once they had done all these things they would be able to provide market access and network opportunities for the products that were in the villages, townships and small towns.

Ms Amanda Kotze-Nhlapo, the Chief Convention Bureau Officer, acknowledged the Members’ views on the grading and stated that they did realise that it was very important and that they would take all the comments into consideration. She stated that 300 people out of about a 1 200, pulled out of the grading scheme during that quarter attributing it to the economy as, during the period, people started to close down temporarily and some permanently. The SAT had the TIP programme, where some applied for it and so their grading fees were covered while some were not compliant and thus had to reapply for it. Addressing the Chairperson’s suggestion, she stated that people that had closed down business would need time to prepare for grading.  With the help from the national department, they had extended people’s grading without being graded, like a payment holiday. There would, however, be a review of those establishments.

Regarding the positioning of the country as a venue of choice, she stated that it all had to do with the confidence of people that were willing to do and attend the meetings. The entity was focusing on the local corporate market to see if it could have smaller meetings. There had also been an establishment of the Events Forum which consisted of all the different associations and their members. The forum, in collaboration with the Department and TBCSA, as part of the recovery plan, came up with the protocols on how they could position South Africa as a place to have the meetings and build people’s confidence as it had been found that people cancelled meetings due to news about Covid. She also mentioned that SA had been chosen to be part of the International Conference and Convention Association Hybrid meeting, where SA would host the Africa hub. The South African Association for the Conference Industry also had their hybrid meeting in Johannesburg, Cape Town and Durban where fifty people met in each of those destinations and the rest were linked on the virtual platform. She said that all of this was in efforts to build the confidence. There was a lot of work that was done by TBCSA, the Department and SA Tourism with regards to rules and protocols to be put in place.

Pertaining to the categories, the entity was busy with a programme which would look at standardised basic qualification verification. This programme would be run in partnership with the Department of Tourism. With the small towns, the entity was in the final stages of working with the provinces in choosing some smaller towns to be the host for the national association meetings.

Mr Themba Khumalo, Chief Marketing Officer (CMO), SAT, stated that over the last few months the entity had been working closely with the CMOs of all the provinces to ensure that everything they did was collaboratively done from the ground up. With the focus on domestic marketing, it was important that the entity understood what was on the ground and that it activated in all the villages, townships and small towns but also focusing on being able to have an aggregated and consistent message. He expressed that the programme the SAT was about to roll out was collaborative and robust in its consistency across all the provinces.

Mr Wavela Mthobeli, Acting Chief Strategy Officer, SAT, highlighted that the numbers that the SAT was reporting on were for January to March 2020, and the President announced a national lockdown on the March 27, 2020. So there were already people travelling in and out of the country before the announcement. The rate of movement changed according to the geographic region where the people came from where Asia declined by 33.7%. Predominantly, 75% of the travellers coming into the country were from the African continent and the neighbouring countries.

With regards to potential scenarios the entity was working on, he expressed that it was difficult to play all the scenarios. Hypothetically, making the assumption that boarders would open in October 2020, SA usually received about 2.7 million arrivals in the October to December period. The most likely scenario was 5.1 million tourist arrivals for the year. Projecting forward, it would take at least two years to get back the levels that the sector was in at the end of 2019. He expressed optimism based on how the country had handled the pandemic as the entity believed that destinations that handled the pandemic well would be chosen first. Research also showed that countries such as SA, New Zealand and Canada would be destinations that travellers were likely to travel to. With the change in consumer preferences, it gave the SAT hope that the industry would recover faster than the early predictions had stated.

Mr Ntshona highlighted that the key focus was the recovery plan. Within the recovery plan there were two key elements: domestic tourism and grading. The recovery plan had a ten point plan included in it and it covered various areas, some of them short in nature and some medium and long term. The recovery was going to be led inside out, starting with domestic, to regional and then international. The domestic part was where all their efforts were going to now, especially with level two being announced and interprovincial travel being allowed. The first key part of the campaign was all about building confidence and trust in all South Africans that it would be safe to consume and participate in tourism activities. The campaign also empowered all South African citizens with knowledge and information so they would know what to expect and demand as they moved through the tourism value chain.

Together with the provincial tourism authorities, there were other initiatives to assist with the smaller players. The Tourism Relief Fund that was set at the national level had been adopted by some provinces, specifically in two areas. One area was how the SAT would assist small business with protocol starter packs as they start their business, because there was an investment to be made in order to be compliant with the health and operational protocols. The second area was how the provinces assisted small businesses in grading. He emphasised that grading was very important. The Department was in the process of getting the protocols to be adopted as country standards and norms. Once that had been done, it would become the standard that South Africa had and would send the right signals overseas giving them assurance of their safety and consistency.

He stated that the Northern hemisphere was giving the SAT great lessons on what to do and what not to do. South Africa was still in the top five in covid-19 infections, around the world. Whilst the country was in that position, the chances of tourism resuming to any significant portion were going to be minimised because if the country were to open, travel advisories would be issued against SA both for international travellers coming into SA, as well as citizens wanting to travel abroad. For the foreseeable future, domestic was the space the SAT was looking at but also looking to come out of the top five in infections.  He said that the private sector had to come to the party in terms of being relevant and appropriate for domestic value proposition, which included pricing, as a lot of them had been looking solely overseas; some of their pricing was backed against the US Dollar and the Euro. Now there was a need to pivot towards domestic market.

The revised APP spoke about gearing for the future. He stated that the future was now, as the sector opened up. Part of the investment that had been made in terms of technology and platforms was all about bringing on board the small, unknown, unidentified, no-marketing budgets, on this platform – making them visible to South Africans in order to engage with them.

Adv M Gumbi, Deputy Chairperson, SAT, highlighted that the SAT was the marketing of the country but the product lied somewhere else. The entity had done its best to put the small establishments on the IT platform so that when they used their website people could see the establishments and their locations. This was in efforts to contributing to creating a diversity of products. She also noted the issue of price and that it was something to collectively work on as South Africans.

Mr T Ikalafeng, SAT board member, stated that from a marketing point, the focus was on domestic tourism as a strategy to recover. From an investment perspective, they pooled some funds as part of the contribution towards the Covid-19 pandemic, so they needed to be clever on how they were going to try and recover those funds. He highlighted the need for partnerships so the SAT did not have too much responsibility to fund everything. These would be partnerships with other entities or with products.

Another member of the board remarked on the comments about rural areas and empowerment of people in those areas to enable them to participate in the tourism business. He expressed confidence around the progress made by the organisation with regards to IT and said that some of the projects undertaken would go a long way in touching some of the people in the rural areas and small towns.

After the responses from the delegation, the Chairperson dismissed the delegation in order to begin with the second item on the agenda.

Consideration and adoption of meeting minutes

The Chairperson reminded the Committee that it had made the proposal to track the implementation of its decisions and resolutions. He stated that the feeling of the leadership of the institution was that the tracking system could not only apply to tourism and thus the system would have to be institutionalised through the entire Parliament. The intention of the Committee was that it would be tracking the decisions and the extent in which those decisions were being implemented. Parliament had not finalised on institutionalising the tracking system.

Following the previous meeting, the Committee had written a letter to KwaZulu-Natal regarding Empophomeni and Howick, based on their site visit. The municipality had acknowledged receipt of the letter and had promised to respond to the Committee. It also received feedback from the Department that as part of their annual report they would be giving them feedback as far as the matter was concerned. It was also indicated to the Department that they needed to be getting regular feedback on the implementation of the resolutions. Assurance was given by the Department that regular report would be given monthly, quarterly and annually and. when necessary, in between those periods when the Committee asked for a response to any enquiries regarding implementation of decisions.

Mr Krumbock asked for clarity regarding checking for mechanisms and Parliament having to make a decision for the entire institution. He also asked for clarity regarding the periodic reporting that the chair had mentioned about reporting monthly, quarterly and annually. Reference was made to a previous meeting, that a decision was made by the Committee for the Department to report to the Committee on this issue in the next meeting, in September 2020. He expressed that he would be unhappy if the Department delayed that until its presentation on its annual report. He asked if the Howick Municipality had sent their first report from January.

Mr Gumbi said that given that Parliament had moved to a system where everything would be online, if the different levels of government had not reported as they were meant to, they should be invited to come before the Committee. He suggested that the municipality should be invited to come before the Committee in the following week to be given the opportunity to speak for themselves as they had had enough time to respond to the issues regarding tourism. This would be in the Committee’s best interest.

Some of the other Members supported the suggestion that some of the municipalities needed to be called to account in the next meeting. The Members also spoke to the need for feedback from the municipalities and; if none was given, the municipalities needed to be invited to the portfolio meeting.

Mr Krumbock asked that all the reports that were outstanding be made available to the Members before the Committee meeting and for a date to be set at which they made sure that the municipality appeared before the Committee.

Ms Makhubela said that the municipality should be allowed to respond to the letter that was written to them, without any timelines.

The Chairperson responded to the Members by reiterating the resolutions that were made in the last meeting’s minutes, regarding the tracking system. He also stated that the Committee had not received the report from the municipality, and that was why his office had written to both the Department and the municipality.

He concluded by stating that there would be an update on the progress regarding the decisions that were taken, not only on Empophomeni and Howick. He suggested that the implementations of Committee’s resolutions should be permanent items in their meetings. The report would not be presented in the next meeting and Members would receive the report from the office on the decisions that had been taken in the past. He stated that the most important thing was that they all agreed on the implementation of their decisions.

The suggestion of the adoption of the previous minutes by Mr Khalipha was seconded by Mr Moteka.

The meeting was adjourned.