https://pmg.org.za/committee-meeting/29936/
Briefing by SANParks on the 2019/20 third quarter report
Ms Joanne Yawitch, Chairperson: SANParks, introduced the presentation. In the details of the report, the PC would see that there are certain areas where targets have not been met so far, but are likely to be met by the end of the year. Then there were areas where there was a “concerning trend” that SANParks would not meet the targets by the end of the financial year. The Board was “deeply concerned about the overall trend in the tourism industry in South Africa. For many years, SANParks had consistently met or exceeded its tourism numbers and tourism revenues. Given that it is an entity that generates “80% of its resources out of tourism”, the overall decline in the tourism industry is a matter of deep concern to the Board going forward, as well as “the possibility of COVID-19 appearing in South Africa”, and the impact that the latter may have. The reason that [the decline] is of concern is that tourism is important to the overall financial sustainability of SANParks, as well as the fact that many of its community interventions (e.g. the beneficiation programmes, building laboratories in schools) all depend on its ability to keep those tourism revenues up. SANParks would be putting in place proactive mitigation measures, and would come back in a few months to report on the fourth quarter.
Mr Fundisile Mketeni, CEO: SANParks, presented the report.
He responded to the issue of rhino poaching spiking in October and November 2019. SANParks saw a different picture: in October 2018, SANParks lost 35 rhinos, and in November, it lost 37. That was a total of 72 rhinos lost. In October 2019, 26 rhinos were lost, and in November 2019, 39 were lost, which was a total of 65. Why the KNP? One is talking about 2 million ha of land, with a boundary of 1 000km that must be covered. KNP hosts 30% of the white rhinos in South Africa, and 50% of black rhinos. The KNP is bordered by Mozambique and Zimbabwe. There are approximately 2 million people bordering the KNP. On the surplus: SANParks generated 80% of its own revenue from tourism and 20% from Government. For the surplus that it gets, it must always request permission from Treasury [to make use of the surplus]; if it gets permission, it will deploy the surplus on areas where it can grow its revenue, on areas where transformation needs to be done, and on areas where it can deal with marketing and maintenance. It depends where the pressures are.
The CEO said that he would only be addressing the red areas [in the performance report].
Percentage implementation of planned activities undertaken for the three new Marine Protected Areas (MPAs) managed by SANParks
Two MPAs were handed over to SANParks to manage, and it had to develop a plan to do that. In quarter two it developed a plan, but in quarter three, it implemented only 71% of scheduled activities. SANParks had to consult with stakeholders on MPAs, introduce itself to the stakeholders, and improve issues of performance.
Tracking park management effectiveness through the number of national parks achieving a Management Effectiveness Tracking Tool (METT) score of ≥ 67% and progress against identified corrective actions
SANParks was yellow on effectiveness. Every second year, it gets assessed on how it is performing in managing parks. In previous years, SANParks was always above target. In this case, the PI was yellow (work in progress) because of challenges with capacity in the KNP, which are being addressed. Regarding infrastructure maintenance: SANParks was busy with a risk report for the KNP.
Percentage reduction of fossil fuel generated energy consumption in Parks and Kruger
SANParks said that it wanted to reduce, year on year, its fossil fuel consumption, but at the same time, it had developed new infrastructure, which is why it had only achieved a 1% reduction of fossil fuel consumption in the third quarter. Challenges in this area included recent extreme high temperatures and below average rainfall, but SANParks continued to create awareness as a corrective measure around fossil fuel use.
Percentage reduction of water consumption in Parks and Kruger
There were water pipeline leakages in major pipelines. The process is under way for the procurement and installation of water meters. Challenges for the KNP included a leak in the main pipeline in the Lower Sabie tented camp; the Tambotie and Orpen camps being 100% occupied, which led to increased consumption; Mopani camp had a pipe leak; and Staff camps still over use water. SANParks wants to continue with replacement of aging bulk water supply and reticulation systems with high pipe burst frequencies. But the ease of funding of infrastructure investment continues to be a challenge.
Total hectares of land rehabilitated/restored
SANParks does get money from the Department for this purpose. Targets were partially achieved in quarter three, but SANParks was initially focused on catchup. Rehabilitation was partially achieved, because the focus was on initial catch-up, because it was doing initial work and follow-up work.
Percentage implementation of the Annual Rhinoceros Plan
There was only one activity not done, but SANParks had seven targets. This area was marked yellow because of certain parts of the Annual Rhinoceros Plan. This is an area where SANParks “needs to be smart on [its] plans; [it] cannot say 95%”.
Percentage implementation of the Annual Elephant Plan
Seven out of eight activities scheduled for quarter three in the Annual Elephant Plan were implemented. There were elephants crossing over from Zimbabwe and damaging sensitive riparian vegetation in Mapungubwe National Park. SANParks is seeking funding to construct a fence in the riparian plain.
Percentage Implementation of the SANParks Wildlife Economy and Sustainable Use Programme
This was not achieved, mainly because there was a delay on game farm inspections. SANParks inspects farms of applicants to make sure that they hold the farm, and have the correct infrastructure. Site visits took up a lot of time. Site inspections have been finalised, and will be concluded in quarter four.
Total number of visitors to National Parks
SANParks will continue trying to market locally, even if it means giving some discounts, because 70% of SANParks visitors are local, and with the current economic situation, there has been a decline in numbers.
Number of New and Diverse Revenue Generating Products Implemented
While the targets were not achieved, Mr Mketeni announced that the Board would be looking at the Letaba concession the following day (Wednesday 4 March), and that the Skukuza Safari Lodge was ready for operation. Concessions for restaurant operators for Satara, Olifants and Letaba, and bush braai operators had been awarded. Targets in this area would be achieved moving forward.
Percentage of a portfolio of opportunities for SMMEs Developed and Implemented
This area was delayed. A question to ask is “are the projects doable?” There tends to be a “shopping list” of projects which are not always doable. In March, SANParks would have a mini lab for Socio-Economic Transformation (SET) in order to identify projects it could implement in the next five years.
Number of Social Legacy projects implemented
The projects were delayed by document processes, but since the processes had been completed, construction would start soon.
Number of Environmental Education (EE) programmes developed and implemented
The EE programme was developed; however, it will only be finalized after the SET mini lab. SANParks wants to combine the EE programme as part of the SET mini lab because the issue of accessibility by schools is seen as a part of transformation.
Percentage of Employees from Designated EE Groups (People living with Disability)
SANParks was “doing quite well” with this target. Previously, people were told that they must come forward and declare [that they have a disability]. Now, the law says that one must prove that one is disabled, and “produce a certificate”.
Percentage closing of critical competency skills gap
SANParks was delayed because of compiling proper terms of reference (TOR), and finalizing areas of competency to be assessed.
Percentage of payroll spent on the skills development programme
SANParks is behind in this area, but has seen a lot of improvement. In the past, there was a misalignment between the budgeting and the actual training conducted. Training was “a bit slow”, and so the budget could not be matched to the training.
Percentage implementation of Enterprise Risk Management Strategy
The Board would be looking at the strategy and policy the following day (Wednesday); it has gone past the risk and audit committee, and the Board would approve it on 4 March.
Develop and implement national priority maintenance and recapitalisation management system
There was a delay because the tender was not evaluated as planned in the third quarter. Mr Mketeni doubted that the target would be achieved, because SANParks wanted to look at back-to-back infrastructure investment, which is very important for SANParks, and for the country as a whole.
Percentage of Stakeholder management plan developed and implemented
In quarter two, SANParks did say that it wanted to develop a plan. In quarter three, it wanted to consult, but it was delayed by stakeholder mapping. SANParks has a “huge number of stakeholders”, such as large non-governmental organisations (NGOs), schools, young people etc. Therefore, there was a need to map stakeholders so that SANParks knew who it was dealing with. SANParks had only achieved 65% of that goal, but it was now “accelerating” so that it had a better plan to present when it returned to Parliament.
Mr Dumisani Dlamini, CFO: SANParks, presented the financial performance of SANParks.
Statement of Financial Position as at 31 December 2019
Assets had grown since the last financial year. Current assets were at R2.3 billion, while non-current assets declined slightly to R2.9 billion. This was mainly due to depreciation, even though SANParks had acquired assets to the value of R69 million.
Current liabilities increased, and there were two main reasons for this. Firstly, payables from exchange transactions, and unspent conditional grants and receipts. Non-current liabilities increased to R950 277. The two areas that influenced this area were finance lease obligation and employee benefit obligation.
Statement of Financial Performance
Revenue up to quarter three was R 2.194 billion. Revenue was made up of various components. It was “not where it should be”, partly because the conservation fees were higher than the budget. The fees were higher by R24.7 million. Tourism revenue was R747 million to date, which was R53 million below target. This was mainly because visitor numbers were down by 2.4% up to 31 December 2019. This means that it is “highly unlikely” that SANParks would reach its revenue targets. The “best forecast” was that SANParks would have a shortfall of R5.7 million by the end of the year. Concessions were 3% below budget, and also reflected a negative 6% variance if compared year-on-year.
Gross profit was below the budget, the main reason for that was a delay in opening Skukuza Lodge, which was part of the budget. The tender would have been issued earlier in the year, but “there was a development there which prevented that from happening”. But SANParks was grateful that the hotel was open, and had already started generating income for SANParks.
Grants were R174 million below budget. Some of the grant that was supposed to be paid by the Department had not been received by time SANParks reported in quarter three. Special projects were below budget by R16.3 million.
Expenditure showed underspending by R76.9 million, which was in line with SANParks’ strategic objectives; the objectives indicated that the budget should be below zero. SANParks was not anticipating any over-expenditure of the allocated budget. The biggest portion of the expenditure budget was people costs, because SANParks’ operation is labour-intensive. Even though SANParks is labour-intensive, people costs made up 51% of the total cost of the organisation. That percentage was lower than many public entities, where the benchmark “is around 60 to 70% of the total operation”. SANParks was expecting slight over-expenditure on people costs, mainly because of salary increases being higher than what SANParks budgeted for, as well as the amount paid to contract and part-time workers. Maintenance was below budget; SANParks had issues with construction companies mainly in Kruger, where it had only one construction company for the greater part of the year. SANParks overcame that challenge by appointing 14 construction companies, who are busy with lots of maintenance in the Kruger. SANParks should be able to catch up [on maintenance backlogs] in the new financial year. Operating costs are mainly under control; there was minor underspending on insurance quotes, marketing costs, and data communication.
SANParks’ surplus up to quarter three was approximately R67 million, which was significantly lower than the previous year. SANParks is trying to “spend aggressively” on necessary core expenditure, while reducing the surplus, so that it makes sure that the money is put to use.
SANParks takes financial sustainability very seriously. If one looks at most of the indicators, one can see that SANParks was generating 80% of its own income, with the balance coming from Government. Its income to cost ratio is 1:1, which means that costs have been managed. On fundraising: SANParks understands that the fiscus is currently constrained, hence it ensured that it was becoming less reliant on the state in terms of receiving money. SANParks raised R83 million through fundraising activities.
In the last financial year, as at 31 March 2019, SANParks generated cash resources of R1.8 billion. Cash resources as at 31 December 2019 were approximately R2.2 billion. SANParks is not only serious about financial sustainability, but also maintains a healthy balance sheet for the organisation. SANParks presented a financial strategy which had been approved by the Board. Through that guidance, SANParks was looking forward to maintaining the financial sustainability of the organisation. In terms of debt collection, SANParks was behind, with its average debt collection at 37%, which was probably because most of the debtors were tied up in litigation. Paying creditors took place within 25 days, which met government policies of paying within 30 days.
Things do fall to pieces if they are not controlled and repaired in time 
