Transformation Forum

1
Transformation Forum 19th June 2008 Presentation
by BM Mosupye
2
Presentation Objectives

• Give an update on TECSAs activities
• Gazetting of codes
• BEE Conference
• Focal Points
• MOU action plan status
• Sector updates

3
Gazetting of codes

• The Minister of the dti has signed off the
  tourism sector
• codes for gazetting
• 60 day public comment period
• Action plan drafted to direct activities during
  this period
• A detailed communications plan has been drafted
  to
• direct strategic messaging to both the private
  and public
• sectors during this period.

4
Transformation is not seen as a priority by the
industry therefore requires government
intervention

Priority of Government Interventions Identified
by the Industry
Drive promotion of SA as tourism destination in
overseas source markets
Improve general infrastructure in the country
(roads safety security etc.)
Promote tourism generally within SA
Improve information and communication
infrastructure
Promote specialized education and training
programs to upgrade tourism workers
Strictly enforce government regulations (i.e.
standards to protect environment etc)
Ensure stability of the exchange rate
Increase predictability of government policies
Simplify compliance procedures related to
government regulations
Support particular needs of start-up companies
Direct new investment expenditure within the
tourism industry
Increase funding for special research institutes
within the tourism industry
Encourage black economic empowerment within the
tourism industry
Catalyze partnerships among government agencies
industry and universities
Catalyze collaboration amongst industry
participants
Percentage of respondents
5
TECSA Mandate Objectives

• The Council is mandated to achieve the following
• Facilitate the communication, popularization and
  interpretation of the Charter
• Facilitate the provision of practical
  implementation and support to the industry
• Facilitate the certification, by dti accredited
  agencies, of entities complying with the
  Charter. The Council will, in so doing,
  facilitate incentives to encourage tourism
  enterprises to comply and become certified.
• Develop a framework as well as capacity for
  implementation of the Charter
• Facilitate implementation of programmes to fast
  track BBBEE in the sector to ensure a favourable
  environment for BEE to flourish
• Advice the Minister on BEE related legislation
  and regulatory developments.

6
TECSA Mandate Objectives

• Our Goal
• To encourage private sector to achieve Tourism
  BEE Charter targets and to report on the sectors
  achievements.
• To influence organs of state to act in accordance
  with the Tourism BEE Charter and use their buying
  power to support empowered entities.
• To ensure that beneficiaries take advantage of an
  enabling environment brought by the Tourism BEE
  Charter.

7
TECSA Mandate Objectives
Focus Area Objective
Private Sector Engagement Increase in the number of private sector stakeholders that comply with the Tourism BEE Charter and Scorecard.
Beneficiaries Engagement Increase in the number of black people that take advantage of an enabling environment created by the Tourism BEE Charter and Scorecard
Public Sector Leveraging Increase number of organs of state who use their lever to drive Transformation
Enabling Environment Create an organisation that provides an enabling environment for delivery against TECSAs objectives
Partnership and Alignment Build Strategic Partnership and Alignment
8
Status Quo Stakeholder Compliance
9
Scorecard Targets
Factor 2009 target (2012) 2014 target (2017)
Ownership share of economic benefits as reflected by direct shareholding by black people 21 30
Strategic representation Black People Board of Directors Black Women Board of directors Black People executive management Black Women executive management 30 15 30 15 50 25 50 25
Employment Equity Black People management Black Women management Black People supervisors, junior and skilled employees Black Women supervisors, junior and skilled employees Black People of total staff Black Women total staff 31 18 45 23 53 28 50 25 65 35 75 40
Skills Development spend on skills development and on all accredited training skills development spend on black employees Number of learnerships as a of total employees Number of black learners as a of total learners 3 75 of 3 2 80 3 75 of 3 2 80
Preferential Procurement Spend on BEE compliant companies as total of procurement spend 40 50
Enterprise Development spend of post tax profit on enterprise development and employee time contributed to enterprise development over total employee time. Enhanced revenue and or cost savings and or twinning initiatives facilitated for black owned SMMEs as a of revenue of the company measured 1 1 1 1
Social Development and Industry Specific CSI spend on post tax profits on education, community programmes, job creation, training, health, conservation, community tourism and marketing activities to develop black tourist market (or employee time over total employee time) of new recruits with no prior work experience Status of Tomsa levy collector 1 10 Yes 1 10 Yes
10
State of Transformation by Sub-sector
Element of the Tourism BEE Scorecard ALL DATA but excluding the too small businesses Accommodation Hospitality Travel Overall

1 Ownership 44.4 45.5 45.6 44.8
2 Strategic Representation 39.8 42.0 40.0 40.1
3 Employment Equity 49.2 51.8 54.6 50.3
4 Skills Development 47.5 49.0 52.2 48.5
5 Procurement 58.9 55.6 64.7 59.8
6 Enterprise Development 64.2 73.1 79.0 66.5
7 Social Development 68.6 64.1 72.4 67.0
AGGREGATE AGGREGATE 51.9 53.5 57.1 52.7
11
Aggregate Results
12
Major BB-BEE deals to date

• Peermont/ MIC buyout 83 R7.3 billion
• City Lodge / Vuwa Inv 15 R485 million
• Tourvest/ Guma 52 R2 billion
• Tsogo Sun 51
• Southern Sun 18

13
What have we achieved to date

• Development of the self assessment tool
• Release of benchmark study on tourism
  transformation
• Enterprise development case studies
• Completed study on funding and advisory services
• Matchmaking database
• CSI projects database
• Black talent database
• Successful alignment of charter scorecard with
  the dti Codes of Good Practice

14
Current challenges

• Challenges
• Cost of verification agencies especially for
  SMMEs who are the majority and the face of the
  industry
• Access to finance by black entrepreneurs
  current BEE funding models unsustainable
• Black SMMEs lack access to preferential
  procurement information to take advantage of it
• Lack of information to quantify the full impact
  of affirmative procurement

15
Current challenges

• Challenges
• SALGA is hindered by lack of capacity tourism
  not a strategic priority
• Provincial governments Strategies not
  coordinated and do not take tourism sector codes
  into consideration
• Skills shortage leading to difficulty in sourcing
  and retaining qualified BEE candidates
• Finding BEE and senior executive partners.
• Lack of alignment between PPPFA and COGP

16
Solutions
17
Solutions

• Tourism codes
• The gazetting of the industry code of good
  practice will be a catalyst toward compliance
• To encourage EMEs to be part of the solution to
  the challenge of transformation, Council took a
  decision to recognize compliance at level 3 for
  EMEs
• QSEs need only implement 4 out of the 7 elements
  thus addressing the ownership and strategic
  representation challenges with this group

18
Solutions

• Government Intervention
• Alignment of PPPFA with COGP will render public
  sector spending as a lever more effective
• Skills Theta to deliver on skills mandate
• Provide incentives for black business to invest
  in the industry
• Transformation as a key priority for government
  should be driven across all tiers of government.

19
Solutions

• Private Sector
• Annual reporting on BEE status
• Preferential procurement actively seek
  empowered suppliers and encourage existing
  suppliers to comply with dti COGP
• Engage and facilitate partnership with
  beneficiaries across the spectra on skills
  development, enterprise development, CSI etc

20
Solutions

• Beneficiaries
• Actively market themselves as business partners
• Proactively engage private sector on the business
  supply and employment opportunities that exist
• Establish collaborative marketing agreements with
  private sector
• Organise into clusters or associations to enable
  lobbying
• Engage government on investment opportunities
• Engage THETA on setting direction for skills

21
Solutions

• TECSA
• Matchmaking database
• Black Talent Database
• Database of CSI projects
• Enterprise Development Case Studies
• Recognition Systems and Framework
• Verification System to enable annual reporting
• Self Assessment tool

22
Funding Advisory Research Results
23
Funding Advisory Research Results

• Research Objective
• To assess and report on the financial resources
  and advisory options available to tourism related
  enterprises to support the implementation of the
  Tourism BEE Charter
• Sample Size
• Total sample 110
• Demand side (Financial and Advisory) 45
• Supply side (Financial and Advisory) 55
• Sample spread across type of organisations and
  geography
• SUPPLY Parastatals (e.g. IDC), public sector
  (e.g. Seda, Apex, NEF, Khula), private sector
  (e.g. banks, Business Partner), development
  organisations (e.g. GEDA, GEP), NGOs, District
  and Local municipalities
• DEMAND Micro, small and medium businesses spread
  across hospitality, accommodation and travel
• Across all 9 provinces

24
Funding Advisory Research Results

• Funding Gaps
• One of the major gaps identified in the study is
  the tourism industrys lack of a consistent and
  well-communicated definition of the industry.
• Key Barriers to Funding Services
• Capital intensity in setup costs
• Early negative cash flows
• Risk Considerations
• Real versus Perceived Demand for Funding Services
• Obstacles to Optimising Funding Advisory Demand
  
• Lack of Transparent Approval Criteria
• Banks have adequate capital but low disbursements
• Innovative funding for weak cash-flow of start-ups

25
Funding Advisory Research Results

• Advisory Services Challenges
• Packaging deals for successful funding.
• Assisting entrepreneurs meet criteria from
  funders that guarantee automatic approval of
  applications.
• Offer Advisory services in a holistic manner a
  keen to incubator turnkey support.
• Assist in keeping expectations of tourism
  businesses moderate to avoid over excitement with
  industry

26
Funding Advisory Research Results

• Key Recommendations
• Establish a TECSA task team on Funding Advisory
  and Incentives (idea endorsed by Steercom
  members)
• Definition of Tourism Industry for funding
  purposes
• Improve quality of data on tourism lending from
  institutions
• Commitment to certain tourism general tourism
  specific BEE funding products to be created
• Commit to guaranteed funding criteria feedback
  communication

27
Funding Advisory Research Results

• TECSAs Role
• Lobby government for relevant grants and very
  soft loans which make funding easier for tourism
  businesses
• Address problem of reporting by engaging
  Financial Services Charter to
• Provide input into and feedback from the
  formation of South Africas Tourism Satellite
  Account and its role in the economy
• Lead in reducing Red Tape and corresponding
  compliance costs in the sector

28
The year ahead
29
The year ahead - Projects

• Gazetting of codes engage private and public
• sector
• Hosting of 2nd annual BEE conference CT
• Call to industry to report on the BB-BEE status
• Activation of the Recognition and Incentives
  framework
• Continue to market council tools in addressing
  some of the identified challenges

30
Year ahead - Public sector

• Key goal
• Use public sector spend on tourism products to
  influence and encourage transformation
• Activities
• Leverage provincial focal point forum to measure
  government compliance at provincial and local
  government level
• Engage SALGA and dplg on accessing municipalities
• Monitor 2010 spent through cluster participation
  and host city engagement

31
Year ahead Stakeholder Relations

• Key goal
• Encourage private sector to comply with the
  tourism codes and create an enabling environment
  for the beneficiaries to take up opportunities
  arising from the compliance of private sector and
  public sector compliance.
• Activities
• Activation of the MOU action plans signed with 10
  key industry associations with the aim of
  unlocking the value of transformation programmes
  especially focusing on skills development and
  SMMEs
• Engage and facilitate beneficiary development
  through skills and enterprise development
  programmes
• Conscientize private sector across industry on
  preferential procurement and the tourism BB-BEE
  scorecard

32
Thank You