R1bn budget cut for tourism department

R1bn budget cut for tourism department

Even the Tourism Department is taking a massive hit from the economic fallout of the Covid-19 pandemic.Tourism Minister Mmamoloko Kubayi-Ngubane confirmed during her department’s adjustment budget vote on Wednesday that its allocation for the 2020/21 financial year has been slashed by just over 60% or R1 billion.

“Before the Covid-19 crisis, our 2020/21 budget allocation was R2.48 billion, of which R1.304 billion was for transfers and subsidies. The department’s revised budget allocation for 2020/21 is R1.48 billion, of which R505 million is for transfers and subsidies,” she said.

“The department has had a total budget reduction of R1 billion, with South African Tourism sustaining the largest budget cut amounting to R886 million, due to suspension of most of the marketing activities.”

Kubayi-Ngubane has taken flak from tourism and hospitality businesses as well as opposition parties, for not fighting more fiercely for the reopening of the embattled tourism industry – at least for domestic leisure travel.

More criticism

In the debate on her department’s budget, she came in for further criticism from the main opposition parties, with both the Democratic Alliance (DA) and Economic Freedom Fighters (EFF) rejecting the budget vote. The DA’s Manuel de Freitas effectively called for the minister to resign, saying she had failed in addressing the industry’s concerns.

But Kubayi-Ngubane said: “This is hardly the time for bickering and apportioning blame, rather the situation demands that we work together to ensure that we weather the storm going forward.”

She said the tourism industry has proven over years that it is a resilient sector and expressed confidence that it would recover post the pandemic.

“So much has already been lost, and admittedly, much of it will take time to recover. However, we should not lose this opportunity to work in partnership, government together with all tourism stakeholders, to prepare for the reopening and growth of the sector,” she noted.

Working together with various stakeholders we have put together the Tourism Recovery Plan and we are in the final stages of consultation and we will within the month [of] August submit the plan to cabinet for approval.”

No timeframes as yet

While Kubayi-Ngubane highlighted various phases in the plan that will initially focus on “hyper-local” and domestic (inter-provincial) tourism, before “opening up” to regional and international travel, she did not give any indication of the timeframes.

“Just as we worked together to ensure that the sector activities opened [such as essential business travel and small-scale business events] at Level 3, we must continue to work together to get more tourism activities open going forward,” she said.

“As per the [national government’s Covid-19] risk-adjusted strategy, economic activities have been curtailed in accordance with the level of risk of increased infections and deaths identified in our country. Unfortunately, we still have a limited understanding of the pandemic thus it remains uncertain as to what will happen in the coming days, weeks or months,” she said.

“I am mindful that this does not bring any comfort to businesses that are in distress and to jobs that have been lost or on the verge of being lost.”

Noting that tourism has been one of the worst affected sectors in the country, she cited a recent United Nations Conference on Trade and Development (Unctad) report that highlighted the impact on the industry.

“Unctad has listed South Africa as one of the top 15 countries that are being the most negatively impacted by the near-closure of the international travel industry during the pandemic. [It] predicts that tourism in South Africa is going to lose 3% in GDP contribution,” she said.

Sombre figures

“It is estimated that R54.2 billion in output may already have been lost between mid-March and the end of May this year.… The sector now faces a potential 75% revenue reduction in 2020, putting a further R149.7 billion in output, 438 000 jobs and R80.2 billion in foreign receipts at risk.”

The minister noted that distressed businesses in the tourism industry have been getting financial support from government, including through the UIF Covid-19 Ters scheme and the department’s R200 million Tourism Relief Fund.

“Working together with the Tourism Business Council of South Africa [TBCSA] we were able to arrange for a special dispensation such that tourism businesses could apply for UIF Ters through the TBCSA,” she said.

She added that the tourism department had also played a role requesting the extension of UIF Ters to August 15.

Kubayi-Ngubane pointed out that businesses can also access funds via the government’s R200 billion Covid-19 Loan Guarantee Scheme. It is unclear however whether tourism businesses have actually been able to access these funds.

Credit: Moneyweb

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