TBCSA commends “balanced budget” but predicts tough times ahead

    Mmatšatši Ramawela, CEO of the TBCSA

    “Finally, the message of travel and tourism as a key economic driver is filtering through Government speeches and plans,” says Mmatšatši Ramawela, CEO of the Tourism Business Council of South Africa (TBCSA), responding to the 2017 Budget Speech by Minister of Finance, Pravin Gordhan.

    “Although not yet regarded as an economic sector by the Department of Trade and Industry, which is something we hope will change” the Budget Speech’s strong mention of travel and tourism is a major vote of confidence for the sector,” Ramawela said.

    In his speech, Minister Gordhan made mention of Government’s plans to provide focused support on labour-intensive sectors including tourism-related services. He announced the allocation of an additional R494 million for tourism promotion as one of the short-term measures to boost investment. This is in addition to the 2016/17 budget allocation to the National Tourism Department of just over R2 billion. He further referred to local initiatives in the tourism and hospitality industry being key to economic progress, quoting a budget tup from Lisa Sheard of the Kruger Lowveld Tourism Association.

    Within the constraints of the local and broader global economy, TBCSA agrees with the broad view of the community that the Finance Minister did not have much room to manoeuvre but nevertheless, delivered an overall balanced budget.

    According to the TBCSA, the additional highlights for business, from a travel and tourism perspective include:

    • National Treasury’s decision to leave corporate taxes unchanged: whilst the Council is mindful of the ongoing debate about the need for corporate South Africa to demonstrate its commitment to the country’s economy by reinvesting their earnings, it is of the view that this measure will go a long way in helping struggling businesses to keep their doors open – thus helping the economy to grow and creating the much-needed jobs and maintaining existing ones;
    • The Minister’s pronouncement on plans to strengthen financial management capacity in municipalities: TBCSA views this as an important focus area, considering that travel and tourism activity takes place in the towns, cities, townships and rural areas. In the Council’s view, the success of this initiative will not only benefit residents but business at large;
    • Proposed reforms of state-owned enterprises (SOEs): TBCSA commends Government for the efforts made thus far to strengthen strategic leadership and the financial viability of struggling SOEs – with a particular focus on South African Airways (SAA) which has a critical role to play in the travel and tourism industry as our national airline carrier. “Leadership and financial challenges within SAA have been ongoing for a long time and the Council hopes current efforts to turnaround the national airline will finally yield positive results.
    • Specific reference to public procurement, which is expected to amount to R1.5 trillion over the next three years: in light of the revised Tourism B-BBEE Charter, the new government travel policy amongst other relevant pieces of legislation around the issue of procurement, the Council looks forward to reviewing the details of the Public Procurement Bill and contributing the enhancement of procurement legislation in the country.

    Despite the above-mentioned positive factors, business in the sector is likely to remain under considerable pressure as a result of tax increases in some parts. Excise duties for alcohol and tobacco will increase again this year, putting pressure on pricing for operators in the hospitality sector. Furthermore, the tourism transport sector will also be under pressure as a result of increases in fuel levy and the road accident fund levy.

    Ramawela says: “Whilst we understand why National Treasury has opted for increases in this area, our quarterly Tourism Business Index has consistently highlighted the cost of inputs as the greatest negative contributing factor to business performance over the past year. With the imminent introduction of additional taxes such as the sugar tax, the carbon tax and the tyre levy – businesses will be under immense pressure and will be pushed to pass these costs on to the consumer”.