South African Tourism is looking to mitigate its exposure to exchange rate fluctuations following a shortfall in its current budget resulting from a R26m expected currency loss during he 2013/14 financial year.
According to SAT’s 2012/13 annual report presented to Parliament’s Portfolio Committee on Tourism, SAT has applied to National Treasury for a special dispensation that will allow it to transfer most of its annual overseas budget to its offshore bank accounts earlier in the financial year in order to reduce the foreign exchange risk. Currency fluctuations resulted in SAT incurring a foreign exchange loss of R 48.99m in the 2011/12 financial year, followed by a R11.27m foreign exchange gain in the 2012/13 financial year.
Portfolio Committee members suggested that SAT should hedge against currency fluctuations, but SAT CEO, Thulani Nzima, said it could not do so, although National Treasury was able to. He said a permanent solution must to be found in terms of the Public Finance Management Act and National Treasury regulations.
In addition, he said, to overcome the cost of doing business overseas, SAT would adopt a hub approach to its marketing abroad from 2014/15 onwards, while the use of virtual offices was also under consideration.
Nzima said SAT had achieved its 12th consecutive unqualified audit report last year and had spent its full annual budget of close on R900m despite the difficult foreign currency environment. It recorded a net deficit of R9.14m compared to an R34.3m net deficit in the previous financial year. Revenue increased by 11% to R866.92m in 2012/13. This was thanks to a 13% increase (R86.3m) in a grant from National Treasury and 14% (R13.8m) increase in the contribution from the Tourism Marketing South Africa (TOMSA) levy. Total expenses increased by 1% to R978.89m in 2012/13.
Meanwhile, Nzima said SAT was engaging with the Department of Home Affairs to improve visa processing in markets such as Angola; and to build capacity to handle increased demand in Nigeria, India and China.
He said the National Convention Bureau’s (NCB), in conjunction with city and provincial convention bureaus, last year submitted 46 international bids with an estimated economic impact of R1bn and with 76 589 delegates. South Africa secured 87 international association meetings (to be staged from 2013 to 2017) with an estimated economic impact of R2.6bn over five years with 195 900 delegates. In 2012 it hosted 106 international association conferences with a combined economic value of R662m and 52 587 delegates.
Some 6022 properties had been graded by the end of March 2012, including 651 hotels (the largest number of 183 in the Western Cape) and 5192 non-hotel accommodation establishments (the majority of 2039 Western Cape-based).