PRESENTATION TO THE PORTFOLIO COMMITTEE ON TOURISM ORGANISATIONAL PERFORMANCE RESULTS QUARTER 4: 2016/17 25 August 2017

Table of Contents Situational Analysis Organisational Performance Overview Leisure Tourism Overview Business Events Overview Tourism Grading Overview Human Capital Update Financial Performance Overview Governance Acronyms

Situational Analysis

Situational Analysis Following the acceleration in the second quarter, South Africa’s GDP growth was recorded at 0.3% in the fourth quarter. Inflation was considerably above the desired limit at 6.6% in Q4 of 2016. Unemployment was notably high at 26.5%, up two percentage points from Q4 2015. Retail spending was also on the downturn in December 2016, further indicating a constrained economy. Together with the ongoing drought - which impacted food prices and availability as well as water consumption - consumers were generally restrained in their spending in spite of the usual season’s festivities.

Organisational Performance Overview

Reporting Periods - KPIs Key Performance Indicator Reporting Period Number of international tourist arrivals January - December E.g. Q1= January –March as approved in Strategic Plan and Annual Performance Plan Number of domestic holiday trips Total revenue achieved E.g Q1= January –March as approved in Strategic Plan and Annual Performance Plan A percentage of brand positivity of South Africa as a tourist destination achieved Twice a year February and November Q1 and Q2 Financial year reporting = February Brand Tracker results Q3 Financial year reporting = November Brand Tracker results Annual Financial year reporting = Average of February and November Number of graded establishments   April – March aligned to the financial year as per the approved Strategic Plan and Annual Performance Plan Number of business events hosted in South Africa E.g Q1 Financial year reporting = January –March as approved in Strategic Plan and Annual Performance Plan

Organisational Performance for Q4 SA Tourism achieved quarterly targets for 5 of its 14 KPIs: Number of international tourist arrivals achieved; Reviewed leisure tourism market portfolio; Stakeholder engagement matrix in consultation with stakeholders; Unqualified audit; and Percentage of staff turnover.   SA Tourism did not achieve targets for 9 of its 14 KPIs: Number of domestic holiday trips; Number of business events hosted in South Africa; Number of business delegates hosted in South Africa; Total tourism revenue; Percentage of brand positivity achieved; Stakeholder satisfaction score; Number of graded accommodation establishments; Number of graded rooms; and Staff satisfaction score. Although the quarter 4 target for Total Tourism Revenue was not achieved, the annual target was exceeded.

2016/17 Organisational Performance Results – Quarter 4 Strategy One: Invest in selected markets for leisure tourism to deliver volume (travellers) and value (tourism revenue) Strategy Two: Work with trade partners to leverage resources to deliver travellers to and within South Africa. Strategic Objectives Number of international arrivals achieved Annual Target Quarterly Target Progress/ Achievements Reasons for deviation Contribute to the South African economy by increasing the number of travellers into and within South Africa. Number of international tourist arrivals achieved 9 077 995 Q1: 2 294 078   Q1: 2 721 005 Target for the quarter has been exceeded. The performance was driven by: Improved value for money due to the depreciation of the rand; Improved perception of safety vis-a vis the world competitive environment; Economic recovery by some source markets; Additional visa facilitation centres across China; re-introduction of a direct air route from Brazil and China; and Various in-market promotional activities Q2: 2 053 746 Q2: 2 248 082 Q3: 2 239 457 Q3: 2 449 664 Q4: 2 490 713 Q4: 2 625 412

2016/17 Organisational Performance Results – Quarter 4 Strategy One: Invest in selected markets for leisure tourism to deliver volume (travellers) and value (tourism revenue) Strategy Two: Work with trade partners to leverage resources to deliver travellers to and within South Africa. Strategic Objectives Key Performance Indicator Annual Target Quarterly Target Progress/ Achievements Reasons for deviation Contribute to the South African economy by increasing the number of travellers into and within South Africa. Number of domestic holiday trips achieved 3 059 764  Q1: 750 474 Q1: 661 000 Both the annual and quarterly performance on domestic holiday trips are below target by 15% and 14% respectively. The underperformance was driven by an overall decline in number of trips taken in quarter 4 from 8.4 million in 2015 to 7.1 million in 2016. As in previous quarters throughout the year, affordability remained the main deterrent to taking a trip. Q2: 603 579 Q2: 621 000 Q3: 553 190 Q3: 356 550 Q4: 1 152 521 Q4: 974 291

2016/17 Organisational Performance Results – Quarter 4 Strategy One: Invest in selected markets for leisure tourism to deliver volume (travellers) and value (tourism revenue) Strategy Two: Work with trade partners to leverage resources to deliver travellers to and within South Africa. Strategic Objectives Key Performance Indicator Annual Target Quarterly Target Progress/ Achievements Reasons for deviation Contribute to the South African economy by increasing the number of travellers into and within South Africa. Total tourism revenue achieved (in billions) R95.7 Q1: R22.8 Q1: R31.3 The quarter 4 under- performance was driven mainly by a 10% decrease in TDDS from the same period in 2015. The decline in TDDS came from an overall decline in number of domestic trips taken in this period. There was also a decline in TTFDS due to the overall decline in spend per arrival from R9 490 in 2015 to R7 851 in quarter 4 of 2016. Q2: R21.6 Q2: R23.2 Q3: R23.3 Q3: R20.9 Q4: R28.0 Q4: R 26,6

2016/17 Organisational Performance Results – Quarter 4 Strategy One: Invest in selected markets for leisure tourism to deliver volume (travellers) and value (tourism revenue) Strategy Three: Position South Africa among the top ten long-haul business events destinations by 2025 while collaborating to convert business travellers to leisure tourists Strategic Objectives Key Performance Indicator Annual Target Quarterly Target Progress/ Achievements Reasons for deviation Build positive awareness of the South African experience. Percentage of brand positivity achieved 40% N/A 38% SA Tourism’s funding has been significantly impacted by the depreciating rand against major currencies and increasing inflation resulting in currency loss. This impacted SA Tourism’s ability to market South Africa as a top of mind tourism destination at the same rate given the declining international budget. Consequentially, SA Tourism's impact on brand positivity in our Core and Investment markets has declined below target in the following markets. Core: Australia (26%), France (38%), Germany (39%), Nigeria (36%), UK (35%) and USA (38%). Investment: Canada (27%), Ghana (25%), Japan (5%), South Korea (8%) and Uganda (36%). Positivity in core markets is at 39% and investment markets at 27%.

2016/17 Organisational Performance Results – Quarter 4 Strategy Three: Position South Africa among the top ten long-haul business events destinations by 2025 while collaborating to convert business travellers to leisure tourists Strategic Objectives Key Performance Indicator Annual Target Quarterly Target Progress/ Achievements Reasons for deviation Contribute to the South African economy by increasing the number of travellers into and within South Africa. Number of business events hosted in South Africa 138 N/A 117 Conferences registered on the ICCA Database. The audit process on the number of ICCA events was not yet completed at the end of the quarter. Number of business delegates hosted in South Africa 77 567 68 408 Delegates attended the 117 ICCA registered events. The audit process on the number of business delegates was not complete at the end of the quarter.

2016/17 Organisational Performance Results – Quarter 4 Strategy Four: Revamp the value proposition of tourism grading to inspire partners and stakeholders to deliver on the brand promise and quality visitor experience. Strategic Objectives Key Performance Indicator Annual Target Quarterly Target Progress/ Achievements Reasons for deviation Improve visitor experience in line with the brand promise. Number of graded establishments 5 650 Q1: 1 273 Q1: 1 251 A total of 5 354 graded establishments were recorded as at end March 2017. This is an underperformance of 5.2%. There was a net cancellation of 1 013 establishments with 252 of these being new establishments that applied for star grading membership but failed to pay the membership fees. Q2: 1 362 Q2: 1 321 Q3: 1 457 Q3: 1 279 Q4: 1 558 Q4: 1 211 Number of graded rooms Q1: 27 631 Q1: 24 933 The number of graded rooms as at end March 2017 was 118 869 which was an underperformance of 3.1%. The 252 new applications that failed to honour the membership invoices accounted for 4 864 graded rooms. Q2: 29 567 Q2: 33 527 Q3: 31 637 Q3: 29 918 Q4: 33 851 Q4: 25 783

2016/17 Organisational Performance Results – Quarter 4 Strategy Five: Revamp the value proposition of tourism grading to inspire partners and stakeholders to deliver on the brand promise and quality visitor experience. Strategic Objectives Key Performance Indicator Annual Target Quarterly Target Progress/ Achievements Reasons for deviation Collaborate with stakeholders and partners to deliver on SA Tourism’s mandate. Stakeholder satisfaction score Set baseline N/A Stakeholder satisfaction survey was not conducted in this quarter. The stakeholder consultation process on the Tourism Growth Strategy took that was to precede the survey took place later than scheduled. Stakeholder engagement matrix in consultation with stakeholders Approved stakeholder engagement matrix in consultation with stakeholders Target achieved. The stakeholder engagement matrix has been included in the Stakeholder Management Framework and is aligned to the stakeholders that were surveyed during the Ministerial Review as well as those identified as important/ influential in delivering against business objectives.

2016/17 Organisational Performance Results – Quarter 4 Strategy Six: Create a culture of excellence and innovation to improve effectiveness and operational efficiency. Strategic Objectives Key Performance Indicator Annual Target Quarterly Target Progress/ Achievements Reasons for deviation Create an organisational culture of work satisfaction, excellence and innovation to improve effectiveness and operational efficiency. Staff satisfaction score 3.7 N/A 2.9 The report identified the following as areas of improvement: - Training and development; Pay and benefits; South African Tourism’s operations in jurisdictions other than South Africa find it difficult to implement some aspects of the PFMA and National Treasury regulations. Unqualified audit Unqualified annual report Target achieved. The staff turnover due to voluntary terminations was 6.6%. Percentage of staff turnover 7% 6,6%

Leisure Tourism Performance Overview

Leisure Tourism Performance in Quarter 4 of 2016/17

International Tourist Arrivals Foreign arrivals accounted for 2.6 million of total tourism trips an increase of 8.7% compared to 2015. Africa remains SA Tourism’s biggest source region followed by Europe and North America. The fastest growing regions were Central & South America (73.8%), Indian Ocean Islands (30.6%), Middle East (29.1%) and Europe (15.7%). The main driver of the increase in foreign trips was tourists visiting for leisure. MICE tourists and business shopping remained relatively stable compared to 2015 while business travellers (corporate travel) saw a -49.4% decline from last year.

South Africa received 2. 6 million tourists with a growth of 8 South Africa received 2.6 million tourists with a growth of 8.7% from 2015 and CAGR of 0.8% from 2014 in this quarter. Arrivals from Central & South America led the double-digit growth when compared to last year and CAGR of over 30% with Asia, Indian Ocean Islands and Middle East also growing by CAGR in double digits.

Geographic Spread The provincial spread in South Africa has improved from an international perspective with the arrivals increasing in 6 of the 9 provinces in this quarter. The provinces that lead the growth were Northern Cape, Eastern Cape and Free State with the double digit growth over 2015. Gauteng was the most visited province in this quarter and grew to reach 1.17 million tourist arrivals with a total of 9.22 million bednights generating an estimated R8.12 billion in revenue. On average tourists stayed 8.2 nights. Western Cape is the 2nd most visited province with 474 462 tourist arrivals generating 4.93 million bednights and R5.10 billion in revenue.

Geographic Spread

Total Foreign Direct Spend (TFDS)

International Tourist Arrivals This year-on-year growth is on par with Australia and well ahead of Thailand for this quarter but our compound annual growth rate (CAGR(2014-2016)) for 2016 is behind both Australia and Thailand. Leading our growth are the Central & South American, Middle Eastern & Asian markets each with double digit CAGR and year-on-year growth. Africa-air also grew by double-digits compared to last year (10.8%), with Africa-land growing below the average for the quarter (6.4%). However in terms if CAGR Africa land saw a -2.4% decline from 2014 levels. Australasia is the only other major sub-region after Africa-land to not have grown above 2014 levels. % Y-o-Y Growth * CAGR Growth (2014-2016) -0.9% *1.9% 8.8% *9.4% 8.7% *0.8%

The pipeline is looking positive for South Africa as the number of bookings are showing a positive trend, if things remain the same we can expect more tourist arrivals for the beginning half of 2017. Source: Forward Keys

Domestic Tourism Performance Indicators Domestic tourism generated a total of R7,7 billion in Q4 2016, which is a 10% decrease from the same period in 2015. The decline in revenue was due to a decline in number of trips taken in this period. Domestic tourists that took trips in this period increased their length of their trips but were budget conscious as they did not increase their average expenditure. Revenue from visiting friends and relatives (VFR) orientated trips remained the biggest contributor but the share thereof decreased from 46% to 45%. Holiday trip contribution accounted for about a third of revenue – down from 34% to 32%. Almost 2 in 5 (38%) South Africans could not afford to take a domestic trip in Q4 2016. A constrained economy alongside high unemployment deterred people from taking a trip. The decrease in total trips was largely driven by a decrease in leisure related trips (VFR and holiday trips). Business trips increased in this period Limpopo continued to receive the most number of trips, followed by KwaZulu-Natal and Gauteng. The number of VFR trips were the cause of increased visits to Limpopo.

Domestic Tourism Performance *Provinces with sample sizes of less than twenty (20) during this period are excluded from the report as they are statistically insignificantly.     **Average spend is the average of the tourist's trip spend across the following categories (where applicable): Accommodation, Transport, Food, Shopping, Leisure, Medical, Shopping, Other.

Domestic Tourism Performance: Purpose of Travel SA Tourism currently reports on VFR, Holiday and Business on a quarterly basis however data is also collected on Religious, Medical and Other as per table below. *Though there is growth noted in the medical purpose of travel, the percentage contribution to the total number trips tracked is still insignificant.

Business Events Overview

Bid Submissions : Quarter 4, 2016-2017 Financial Year Number of Submissions Delegate Numbers Conferences Days Estimated Economic Impact 2013-2014 57 78 843 237 R977m 2014-2015 52 119 477 (Aids Assn 20 000 Delegates) 230 R1.4bn 2015-2016 54 86 692 247 R 1.28b 2016 -2017 Q1&Q2 48 57 355 207 R 968m As at 2016 -2017 Q3 66 100 233 R 1,1bn As at 2016-2017 Q4 78 139 936 (50 000 delegates from Animatronics expo 401 R 1.3bn

Bid Submissions : Quarter 4, 2016-2017 Year Cape Town Durban Johannesburg Tshwane Ekurhuleni Multi City Proposals 2013-2014 38 (67%) 11 (19%) 7 (12%) 1 (2%) 2014-2015 34 (65.4%) 9 (17.3%) 8 (15.4) 1 (1.9%) 2015-2016 28 (51,85%) 14 (25,93%) 3(5.56%) 2 (3,70%) 7 (12,96%) 2016-2017 Q1 & Q2 27 (56,25%) 5 (10,42%) 8 (16,67%) 1 (2,08) 7 (14,58%) Q3 35 (64.8%) 5 (9.3 %) 10 (18.5%) 1 (1.9 %) 4 (7.4%) As at 2016-2017 Q4 47 (54.1%) 6 (10.4 %) 10 (20.8 %) 1 (2.8 %) 14 (4.1%)

Bid Secured Pipeline for the next 5 years Number of Secured Bids Conference Days Delegates Estimated Economic Impact 2018 29 135 31 478 R469m 2019 9 42 6 982 R113 2020 7 31 37 600 R 494 2021 3 11 11 000 R135m 2022 5 22 10 100 R 231m

Regional Distribution

Tourism Grading Overview

Grading of Establishments The TGCSA quality grades establishments according to eleven categories across all 9 provinces The categories are as follows: Backpacker & Hostelling Bed & Breakfast Caravan & Camping Country House Game Lodge Nature Reserve Guest House Hotel Lodge MESE (Meetings, Exhibitions, and Special Events venues) Self catering Exclusive Use Shared vacation

Total Number of Graded Establishments As at 31 March 2017

Total Number of Graded Rooms As at 31 March 2017

Annual Growth/Decline: Graded Establishments/Rooms by Province 2016/2017 Financial Year

Annual Growth/Decline: Graded Establishments/Rooms by Product Type 2016/2017 Financial Year

Human Capital Update

Workforce Profile SA Tourism’s workforce profile is as follows: Status No % Permanent Employees 146 81% Fixed-Term Contracts (Country Managers & EXCO) 11 6% Contract employees 19 10% Internship 5 3% TOTAL 181 100%

Vacancy and Occupancy Report per Business Area The organisation is operating at 77% (157) capacity against the approved staff establishment of 202. The remaining 23% (45 vacancies) is recorded as vacancies as a percentage of headcount. To ensure business continuity and fulfillment of the vacant roles, SA Tourism has appointed temps and interns as per the last two (2) columns in the table below. A detailed analysis on occupancy and vacancy rate has been provided below: Business Unit Approved positions Occupied positions Vacant positions Temporary staff Interns Office of the CEO 6   Operations 30 28 2 5 Finance 23 22 1 SANCB 15 10 Marketing 114 79 35 4 TGCSA 14 12 Total 202 157 45 19

Employment Equity Update *Interns are part of the temporary staff because they are on fixed term contracts.

Organisational Review Project

Outcomes of the Ministerial Review in relation to Organisational Structure and HR Development Key Priorities Conduct a review of the role, performance and capabilities of the HR function Create a culture of engagement and empowerment within and across all levels and units of the organisation Introducing ways for middle management to engage in strategic discussions Effective Delegations of Authority to devolve decision making to management Change management process to shift organisational culture Staff satisfaction surveys and implementation of recommendations Skills Audit to understand the skills gaps Build and enhance EXCO and leadership team capabilities to carry out their roles and duties as per their KPAs Review and redesign the organisation structure taking into account the funding and resource constraints including currency risks and losses

Summary of the key activities completed to date Below is a summary of the key activities completed in the project initiation and assessment phases Define scope Develop project plan and management approach Align leadership team to drive the case for change Conduct change readiness survey Define data requirements Data collection Desktop analysis of documents Conduct interviews with the relevant stakeholders Understand current business process mapping of the functions Develop a change management strategy and plan Develop tailored design principles Develop organisational process landscape Define operating model Develop a proposed optimal high level structure Design a detailed organisational micro structure based on the agreed high level design Review and develop job profiles in line with proposed structure Define head count implications and costs Develop leadership competency frameworks Develop people migration plan Develop an IT strategy to align processes Develop an Implementation plan. Placement and recruitment Conduct skills audit Develop training plans Project closure and reporting Initiation & kick off Current state Design Implementation planning Project imitation Plan for implementation Develop the detailed design Develop the high level design Conduct current state assessment Change management, programme management Phase 1 Phase 2 Phase 4 May 2016 May-July 2016 August- December 2016 January 2017 Phase 3

Financial Performance Overview

Revenue streams graphical illustration

Quarterly Revenue Analysis *Other Income = Indaba, Meetings Africa, Interest and Grading.

Statement of Financial Performance-Expenditure by accounting classification. Marketing expenses of R 929.48 mil makes up 73% of total expenditure whilst remaining 27% is made up of Administration costs. Included in Administration cost is Personnel costs which makes up 14% of the of the total budget. The administration expense balance of R 352.48 mil comprises of operating expenses. Marketing expenditure relates to investment in leisure marketing, quality assurance and business events.

Marketing Expenditure

SA Tourism per objective analysis

Governance

Board Meeting Attendance Q4

Board Meeting Attendance Q4  Name Remuneration Flights Accommodation Car Hire Tanya Abrahamse (Chairperson Non-Remunerated position Thebe Ikalafeng (Deputy Chairperson) R28,935 Ayanda Ntsaluba R36,693 Graham Wood R31,987 R5502.14 R4305.82 R1280.12 Chichi Maponya R14,118 Oregan Hoskins R25,883 R2540.60 R1830.00 R3193.48 Michelle Constant R31, 987 Colin Bell R4122.40 R2912.82 Amor Malan R16,471 Judy Nwokedi R26,582 Mmaditonki Setwaba Non-remunerated position Yacoob Abba Omar Enver Duminy R8271 Mmatsatsi Ramawela R9,412

Abbreviations and Acronyms CAGR Compound Annual Growth Rate MICE Meetings, Incentives, Conferencing and Exhibitions VFR Visiting Friends and Relatives EAP Economically Active Population (People from 15-64 years of age who are either employed or unemployed and seeking employment) TDDS Total Domestic Direct Spend. The average spend comprises of amounts spent on Transport, Food, Shopping (personal), Accommodation and Leisure. TGCSA Tourism Grading Council of South Africa TOMSA Tourism Marketing South Africa TTFDS Total Tourist Foreign Direct Spend UNWTO United Nations World Travel Organisation

Thank You Slide no. 55