BUSINESS CASE FOR THE MPUMALANGA TOURISM AND PARKS AGENCY (MTPA) MPUMALANGA DEPARTMENT ECONOMIC DEVELOPMENT, ENVIRONMENT AND TOURISM DRAFT 6.

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1 BUSINESS CASE FOR THE MPUMALANGA TOURISM AND PARKS AGENCY (MTPA) MPUMALANGA DEPARTMENT ECONOMIC DEVELOPMENT, ENVIRONMENT AND TOURISM DRAFT JUNE 2009

2 Executive Summary This Business Case for the Mpumalanga Tourism and Parks Authority (hereinafter referred to as the MTPA ) motives for adjustment to the MTEF baseline allowance and for various items of non-recurrent capital and operational expenditure. The MTPA is a Schedule 3C Public Entity, accountable through its Board to the MEC for Economic Development, Environment and Tourism (DEDET), with the following mandate: Management of approximately 1.1 million hectares of protected areas in the Mpumalanga Province with the purpose of conserving biodiversity and the extension of such management to other natural habitats in the production landscapes of the Province through Biodiversity Stewardship Management of tourism facilities within the Agency s protected areas with the purpose of maximising tourism income from these facilities Promoting and enabling all forms of tourism within the Mpumalanga Province with the purpose of contributing to the economic development goals of the Mpumalanga Provincial Growth and Development Strategy Management of all MTPA activities so as to promote local economic development. A preliminary estimate of the size of the biodiversity economy, in Mpumalanga, is R1.6 billion per year in The contribution of tourism to the Mpumalanga economy was estimated to be R617 million in Public services provisioning make up the majority of these mandated requirements. The MTPA is currently underfunded for the timely achievement of these mandatory requirements. This Business Case therefore proposes a revised Call on Funds from the Mpumalanga Revenue Fund, which would enable the MTPA to deliver on its mandate. The MTPA has undergone major change and transformation between 2006 and The MTPA established on 1 April 2006 through merger between the previous Schedule 3C public entity, the Mpumalanga Parks Board, and the Section 21 company, the Mpumalanga Tourism Authority. During its first two years of existence, the MTPA was characterised by a senior leadership team comprising mostly acting positions, and the lack of adequate business systems. This resulted in a disclaimer audit report by the Auditor General in These matters have since been addressed and MTPA received a qualified opinion in 2008 (dated 31 July 2008). (The basis for the qualification resulted from the disclaimer of opinion in 2007 which prevented the Auditor General from establishing opening balances for the 2007/8 financial year.) The MTPA appointed a new Chief Executive Officer (CEO) on 1 September 2008, and since then various key business systems have been implemented. The key short term goals for the organisation are now to: address financial efficiency and sustainability challenges build institutional capacity ensure alignment of the three core business dimensions of MTPA: financial, operational, strategic the 2009/2010 business plan is to address six core fundamentals: a. reduce reliance on the provincial grant funding to 60% over the next 5 years b. target 40% external income by

3 c. simultaneously restructure to reduce the human resources component of the budget from 66% to 50% d. increase the expenditure on marketing Mpumalanga as a tourist from 12% to 30% of total income by 2016 e. increase training expenditure from 3% to 10% of total budget f. increase expenditure on maintenance from 13% to 20% of total budget ensure MTPA s contribution to Mpumalanga economy (GRP contribution), alignment with PGDS quantitatively and qualitatively create a humanised workplace environment, focusing on creativity, innovation, democracy, and accountability. MTPA has a range of legacy problems to address, such as in communication, the promotion of public awareness and education, and the improvement of stakeholder relationships. For all of these MTPA is now well resourced. The organisation is now poised for a significant growth phase, and is resourced to meet current commitments. However, to position itself to address identified threats and opportunities, MTPA requires new and additional funding that will ensure that it is able to meet its public-service commitments under the challenges emerging in Mpumalanga. The new funding is required to address six areas of challenge and growth: Funding of the proposed infrastructure upgrade. In Biodiversity Conservation: o Expansion of Provincial Protected Area (PA) land to 322,000ha by 2016, as envisaged in the Mpumalanga Protected Area Expansion Strategy (MPAES), through the implementation of a land acquisition fund o Adjustment of conservation area funding to the Kwazulu-Natal and Western Cape benchmarks. This includes full funding of the previous Limpopo parks and the capacity to complete and manage the MPAES and the Songimvelo-Malalotja TFCA (new entity; see details below) and embed these into the Conservation Management function o An expanded Biodiversity Stewardship function, to deal directly with stewardship as well as supporting DEDET in certification of PA management plans for tax rebates, in mitigation offsets, and other instruments arising from the National Grasslands Programme (NGP) o Increased capacity to fast-track the land claims resolution strategy. Tourism Destination Marketing o Increase marketing expenditure from 12% of budget, to 30% in 2016 o Implement the 2010 FIFA World Cup Strategy. Tourism Business Development o Increased capital resources to grow external income to 40% of total operational come o Establishment of a tourist business concession unit o Implementation of the SMME and second economy intervention strategy. Other general requirements: 3

4 o Compliance functions relevant to biodiversity and tourism: an additional Green Scorpion anti-poaching function o Knowledge Management An increment to the budget for scientific capacity in biodiversity for SANBI/NGP interfaces A capital investment to upgrade ICT and extend effective ICT to PAs and research groups o Cross-cutting institutional development requirement: additional funding for training and organisational development to provide for 10% of total budget to go to training, from the present 3%. 4

5 Table of contents Executive Summary... 2 Table of contents... 5 Abbreviations and acronyms Introduction and overview The establishment of MTPA MTPA s mandate and its relation with DEDET and other organs of state The operating context Tourism Biodiversity conservation Local Economic Development MTPA Infrastructure SWOT analysis MTPA s Strategy Business strategy Ensuring sound governance Strategic interpretation of MTPA s mandate and MTPA s objectives MTPA core functions and services Ability of MTPA to Spend Funds Call on Funds Financial projection Adjustment to baseline allocation Non-recurrent allocation Growth in baseline allocation Land acquisition fund Addendum 1: List of References Addendum 2: The MTPA Mandate Introduction The mandate and role of the provincial sphere of government in tourism and nature conservation Statutory requirements Addendum 3. Value statements relevant to the mandate of the MTPA Introduction and overview Biodiversity Conservation Tourism Destination Marketing for Mpumalanga Tourism Business Development Contributions to local economic development (LED) Compliance functions relevant to biodiversity and tourism Knowledge Management and reporting Conclusion and summary

6 Abbreviations and acronyms CEO COO CPPP CSO DARDLA DEAT DWAF DEDET HOD KM LED MA MBCP MEC MPAES MTGS MTPA NEMA NEMBA NEMPAA NGP PA PFMA PGDS PPP PRF SANBI SANParks TFCA Chief Executive Officer Chief Operations Officer Community Public Private Partnership Chief Supporting Officer Department of Agriculture, Rural Development and Land Administration Department of Environmental Affairs and Tourism Department of Water Affairs and Forestry Department of Economic Development, Environment and Tourism of Mpumalanga Head of Department Knowledge Management Local Economic Development Millennium Ecosystem Assessment Mpumalanga Biodiversity Conservation Plan Member of the Executive Council of the Mpumalanga he Provincial Government Mpumalanga Protected Area Expansion Strategy Mpumalanga Tourism Growth Strategy Mpumalanga Tourism & Parks Agency National Environmental Management Act National Environmental Management: Biodiversity Act National Environmental Management: Protected Areas Act National Grasslands Programme Protected areas (in terms of NEMPAA) Public Finance Management Act Provincial Growth and Development Strategy Public Private Partnership Provincial Revenue Fund South African National Biodiversity Institute South African National Parks Transfrontier Conservation Areas 6

7 1. Introduction and overview 1.1. The establishment of MTPA The Mpumalanga Tourism and Parks Agency Act of 2005 established the Mpumalanga Tourism and Parks and Agency (MTPA) through the merger of the former Mpumalanga Tourism Agency and the Mpumalanga Parks Board. This step was the culmination of a difficult process of political change, organisation building and institutional innovation, beginning in 1986 with the assignment of provincial nature conservation functions from the former Transvaal Provincial Nature Conservation Department to the then Eastern Transvaal Province. At that time, the function began as the Mpumalanga Parks Board, with the former Kangwane Parks Board and its analogues in the then KwaNdebele and Lebowa operating in parallel in the former homelands of those names. The Mpumalanga Tourism Agency arose also in parallel after The merger of the pre-democratic conservation agencies into the Mpumalanga Parks Board, a promising move initially, was subsequently dogged by conflict and controversy. Latterly, soon after establishment of the Agency, it has received transfer of several protected areas (PAs) from the Limpopo Province, while the Department of Water Affairs and Forestry is in the process of transferring additional PAs to MTPA. The deployment of the Biodiversity Stewardship function outside PAs, has just begun and is set to grow rapidly MTPA s mandate and its relation with DEDET and other organs of state In terms of its Act, MTPA is established as a Schedule 3C Public Entity, accountable through its Board to the MEC for Economic Development, Environment and Tourism, MTPA has very great responsibilities in the Province. It must provide for the sustainable development and improvement of the tourism industry in Mpumalanga; [and] provide for conservation management of the natural resources of Mpumalanga; these both within and outside the estate of protected areas managed by MTPA. Taking just the management of biodiversity, we see (section 4.3 below) that MTPA is directly responsible for the management of ha, while the currently informal protected areas (Joint Management Areas, Conservancies) constitute a total of a further ha where MTPA has an advisory and auditing role (Table 1). The total number of statutory protected areas is 58 and the informal protected areas, This asset base is not secure, since all PAs, including those in transfer, are subject to land claims, and resolving these claims has been a very slow process. Substantial work is needed in tandem with resolution of claims, to establish settlement agreements and co-management agreements (benefit sharing arrangements) as well as engagement of the broader community in the process of reaching these agreements. It is important at this point to emphasise that, in terms of line functions, there is a clear distinction between (a) biodiversity management (b) the marketing and promotion of tourism for Mpumalanga as a Province, a market that goes well beyond ecotourism, and (c) the development of ecotourism on the protected area (PA) estate controlled and managed by MTPA. MTPA s strategy clearly recognises this. 1 From information provided by MTPA and contained in the Mpumalanga Biodiversity Conservation Plan 7

8 Regarding tourism, the development and marketing role of the Agency must have the outcome of raising Mpumalanga s low (and falling) standing in the country s rankings, from eighth in the ratings for domestic tourism and fourth for international, to the standing of world leader. The Province currently has a low ranking indeed considering the fact that the Kruger National Park is a leading international drawcard and that ecotourism is the fastestgrowing international tourism subsector. In summary, the core functions coming from MTPA s statutory mandate are as follows: 1. Biodiversity conservation: S3(2)(a) and (b) (...the Agency shall a) provide for the effective management and conservation of biodiversity and ecosystems within the province; and b) develop and ensure effective management of protected areas ) 2. Tourism destination marketing: S3(2)(c) (... the Agency shall- c) foster, promote and sustainably develop and market tourism; ) and S4(9)(a-f) (Provincial policies, programmes and regulations; monitoring, evaluating and ensuring the implementation of, and compliance with policies, programmes and regulations; international, regional and domestic marketing strategies; etc) 3. Tourism business development: contribute to S3(2)(c) (... the Agency shall- c) foster, promote and sustainably develop and market tourism; ) Table 1. Summary of the extent of protected areas in the province of Mpumalanga that are the direct or indirect responsibility of MTPA. The statutory protected areas would be managed directly by MTPA. With respect to informally protected areas, MTPA would have at least an advisory and a stewardship role. From information provided by MTPA and contained in the Mpumalanga Biodiversity Conservation Plan. Category of Protected Area Size (ha) Statutory Protected Areas Local Protected Areas 3,460 State Forests 13,238 Private Nature Reserves 134,174 Provincial Nature Reserves 220,000 Other 41,758 Sub-total 412,630 Informally Protected Areas Conservancies 459,697 Joint Management Areas 32,772 Leased Areas 1,449 Potential Reserves 12,821 SA Natural Heritage Sites 111,871 Unallocated State Land 25,246 Sub-total 643,857 Grand Total 1,056, The operating context 2.1. Tourism Foreign tourist arrivals in Mpumalanga numbered 1,175,419 in 2006 and direct spending by foreign tourists during that year amounted to about R677 million (MTPA Statistics 2007/8). The majority of international tourists come from Africa and the Middle East (65.2%) (though South African Tourism reports 72% from neighbouring states), followed 8

9 by Europe (24.6%), the Americas (6.9%) and finally Asia and Australasia (3.3%) (MTPA Statistics 2007/8). This is about 10 % of the South Africa s recorded annual arrivals (this information and that below from South African Tourism, 2006 and World Tourism and Travel Council (2005-6)) Currently, among the provinces, Mpumalanga is the eighth-most-preferred tourism destination among domestic visitors, and fourth-most among foreign visitors. For domestic arrivals, it rates higher only than the Northern Cape, and its arrivals are nearly as little as one-tenth those of KwaZulu-Natal. There is clearly much room for growth. Mpumalanga is therefore not yet realising the potential of tourism in the Province. According to SA Tourism, the fastest-growing segment of tourism in South Africa is ecological tourism (ecotourism). Mpumalanga has great potential for this segment yet as we see above it has performed poorly in attracting ecotourists. Steps under way now, for example the proposal for the Songimvelo-Malalotja Transfrontier Conservation Area, will as whole build a platform to achieve this, but the development and marketing has still to be done. TGDS There are three market segment categories for tourists visiting Mpumalanga. These align to the official definition of tourism as used by Statistics South Africa and SA Tourism, and include: Category A: Holiday and Business Tourism Category B: Shopping, Religious and Medical Tourism Category C: Visiting Friends and Relatives, Business Travel and Trade. Category A includes tourism activities within which MTPA can play a direct fostering, promotion, development and marketing role (Section 3(2)(a) of the MTPA Act). Category B includes tourism activities within which MTPA can play an indirect promotional role. In this category, MTPA may partner with goods and services providers in the retail and medical sectors to promote their products to a variety of consumer markets. Category C includes activities that fall beyond the sphere of influence of the MTPA, although the MTPA may play an indirect role, principally through the licensing and monitoring of tourism persons and entities in terms of Section 31 of the MTPA Act. The Mpumalanga PGDS 2008 Review notes: While tourism is an AsgiSA sector, Mpumalanga s tourism industry is not achieving its growth potential. Much attention has been devoted to the comparatively mediocre performance of the province, with international visitor arrivals and bed-nights remaining relatively static, and domestic tourism (from other provinces) not showing any signs of long-term growth. Nevertheless, total market size for tourism in Mpumalanga in 2007, for the Category A and B segments, was R1.5 billion. The economic sectors benefiting most from tourist expenditure were the Trade, Transport, and Accommodation sectors. Note that market size, or gross turnover, is not same as contribution to GDP; the often quoted 8-10% of GDP is the actually the gross tourism expenditure. However, Statistics SA recently published the SA Tourism Satellite Account, which estimates the contribution of tourism to GDP to be 3.1%. In 2007, the contribution to GDP of this market in Mpumalanga was R617 million, which was approximately 3% of Mpumalanga GDP. The Mpumalanga PGDS proposes that, by various target dates: 9

10 Growth in domestic tourism of 20% is achieved (by the end of the 2008/2009 Financial Year) Growth in international tourism of 5% is achieved (over a five year period) HDI ownership of 30% is achieved by end of 2014 In terms of tourism growth, MTPA would therefore need to achieve the following: Increasing domestic tourist trips to more than 670,000 trips per year (up from 560,000 trips per year) Increasing international tourist trips to more than 168,000 trips per year (up from 159,000 trips per year). Achieving the transformation target in the PGDS of 30% by 2014 will mean achieving HDI ownership in a variety of economic sectors, such as trade, transport and accommodation. MTPA has identified a strongly monopolistic structure in the Mpumalanga tourism industry and needs to implement extra-ordinary measures to achieve the PGDS targets. The market-segment categories defined in this report serve as the basis for defining the roles and responsibilities of MTPA. This Business Case includes proposals for the required strategic response of MTPA with respect to its mandate in the tourism sector. These proposals take account of the Mpumalanga Tourism Growth Strategy (2007) 2.2. Biodiversity conservation The Mpumalanga Province contains three of South Africa s nine biomes: Grassland (highveld and escarpment hills), Savanna (escarpment foothills and lowveld) and Natural Forest (south- and east-facing escarpment valleys) (MBCP 2007). The Grassland Biome is the largest biome found in Mpumalanga and is second only to the Cape Fynbos in species richness. The biome originally covered 64% of the biome, but 44% of this has been transformed by agriculture, mining operations and other development. 2 The Savanna Biome is the second largest biome in the Province, covering 39% of Mpumalanga. Agriculture and other development 25% of the original area has been transformed. Natural Forest (excluding plantation forests) is the third biome found in the Province. These indigenous forests occur in small, scattered patches, mostly in river valleys in the escarpment region. They are rich in diversity despite their small size and patchiness. Forests are also culturally important as they rich sources of traditional medicines and spiritual inspiration (MBCP 2007). Vegetation types provide a good representation of variations in terrestrial biodiversity because most animals, birds, insects and other organisms are associated differentially with particular vegetation types (Rouget et al. 2004). The SANBI vegetation map of South Africa, Lesotho and Swaziland shows 68 vegetation types in Mpumalanga Province (Mucina et al. 2005). 2 National Grasslands Biodiversity Programme (NGBP) Project Document 10

11 Apart from terrestrial ecosystems, Mpumalanga contains a rich diversity of aquatic ecosystems. Rivers and wetlands are extremely important ecosystems for South Africa and provide many important ecosystem services. Successful management of these water resources is vital, not only because of the ecosystem services they provide for the Province, but also for downstream water users such as Swaziland and Mozambique. The National Framework for Sustainable Development in South Africa focuses on the inherent linkages between human welfare and well-being, equity and sustainable living and thus the manner in which socio-economic systems are embedded within, and dependant upon, eco-systems. The explicit construct that links biodiversity to human wellbeing is the framework system of ecosystem services that developed through the work of the Millennium Ecosystem Assessment (the MA). The MA framework links the environment pillar of sustainable development to the Millennium Development Goals, This takes ecosystems to be assets that yield a flow of services of benefit to people, much as other capital stocks do. Ecosystem services include provisioning services (covering the production of commodities such foods, fuels, fibres), cultural services (covering nonconsumptive uses of the environment for recreation, amenity, and spiritual renewal) and regulating services (covering the absorption of pollutants, storm buffering, erosion control and the like). One proxy that may be used to estimate the value of the biodiversity economy is the average environmental-economic value of the Grassland Biome, as estimated by SANBI. This value was estimated to be R290 per ha in 2006, and, after adjustment for inflation, is equal to R305 per ha in (This number may be interpreted as the total annual value of all ecosystem services (as defined in the MA above) provided by one hectare of grassland.) However this estimate does not take full account of the regulatory ecosystem services provided by the Province, and therefore underestimates the conservation value. Alternative benchmarks to use are the conservation spend by the KwaZulu-Natal and Western Cape provincial governments, which are R435 per ha and R438 per ha respectively. Nearly 2.0 million hectares of Mpumalanga are protected (in provincial and national reserves, this includes Kruger National Park) and another 3.7 million hectares are natural grasslands and thickets and used primarily for grazing. MTPA is the custodian of approximately 1,057,000 ha of protected areas in Mpumalanga (Table 1), in addition to its responsibility for the management of biodiversity in the whole province (excluding the Kruger National Park). A preliminary estimate of size of the biodiversity economy, in Mpumalanga, based on the SANBI estimate, is R1.6 billion per year in 2007, equal to about 1.3% of GDPR Local Economic Development MTPA has a definite role to play in Local Economic Development (LED) on Mpumalanga. Here, LED corresponds with the provisions in the MTPA Act, S3(2)(d), which states that... the Agency shall- d) promote and create socio-economic growth and transformation within the tourism and conservation industry, thereby creating economic and employment opportunities for previously disadvantaged individuals and local communities in the Province. This provision requires that MTPA should develop and implement a strategy 3 SANBI (2006). Monetary valuation of the grasslands in South Africa. Grasslands Programme 11

12 that would maximise the contributions of its activities to LED and on which much of the Business Case depends. According to the Mpumalanga PGDS, approximately 61.6% of the population is poor. During the period a 9.9% reduction in this rate was seen nationally, compared to 2.1% reduction in Mpumalanga. Poverty, using the lower-bound line of R174 per capita per month, declined from 38.6% to 27.9% over the same period nationally. However, provincial poverty rates remained almost unchanged in 2005 (PGDS 2008). Mpumalanga ranked third in unemployment in the country after the Western Cape and Gauteng in September The unemployment rate, following the official definition, stood at 22.9% in September 2007 (PGDS Economic Growth Theme 2008). A feature of unemployment in the Province is the gender imbalance in the job uptake. In September 2007, the female unemployment rate was almost twice that of males and above the national average (PGDS Economic Growth Theme 2008). LED has been defined in a variety of ways. The World Bank, for example, states: Local Economic Development (LED) offers local government, the private sector, the not-for-profit sectors and the local community the opportunity to work together to improve the local economy. It aims to enhance competitiveness and thus encourage sustainable growth that is inclusive. This definition guides the National Framework for Local Economic Development in South Africa ( ). From this comes the vision for local economies in the Framework: Robust and inclusive local economies exploiting local opportunities, real potential and competitive advantages, addressing local needs and contributing to national development objectives. LED is an ongoing process in which key stakeholders and institutions including all social partners work jointly to create a unique advantage for the locality and its firms, tackle market failures, remove bureaucratic obstacles for local businesses and strengthen the competitiveness of local firms. The National Framework for LED in South Africa (developed by the Department of Provincial and Local Government and followed by local government in the development of IDPs) aims to support the development of sustainable economies through integrated government action. Within South Africa, LED policy is closely associated with the transition to developmental local government where municipalities have a play a proactive role to promote development. LED is one of the five Key Performance Areas (KPAs) for Local Government and is strongly interrelated and dependent on the other four KPAs. For the purposes of this study, LED is the promotion of sustainable local enterprises through economic value-addition arising from the procurement of goods and services from local firms by MTPA or its leaseholders, together with local enterprise formation arising from the business opportunities created through the exercising of MTPA s functions. The transformation imperative on MTPA requires the engagement of HDIs in its economic sector. The objective with respect to tourism is that 30% of tourism entities should be in the hands of HDIs, for example. This objective means that MTPA will need to achieve a reasonable level of assurance that emergent firms will have a good chance of surviving and prospering as profitable firms, 12

13 while not excessively sheltering these firms from the usual competitive business environment. This means that in pursuing its objects, MTPA will need a carefully crafted strategy to meet the requirement to promote and create socio-economic growth and transformation within the tourism and conservation industry. We interpret this to mean that MTPA should promote LED in everything it does, but to centre its efforts on local communities MTPA Infrastructure MTPA infrastructure are in a state of degradation as insufficient funding has been available to maintain and replace depreciating assets, especially staff quarters, other buildings, fences and roads. MTPA has conducted a full infrastructure audit on the requirements for upgrading existing infrastructure. The success of this Business Case depends, to a large extent, on the upgrade of this infrastructure. 3. SWOT analysis The matrix below summaries the operating context of MTPA, in terms of its strengths and weaknesses, the threats it faces on its mission, and the opportunities available to it. The assessment reflects strategic assessments and review over the past 12 months. Table 2. SWOT analysis Strengths Policies and procedures for compliance with PFMA in place (cross-cutting) ha of managed land Technical skills and capacity and information from 1986 (cross-cutting) Strong leadership Organisational structure and job grading completed (cross-cutting) Protected Area management plans under development A strong rural reach Business modelling has been completed Key development instruments have been approved by the Board Strong stakeholder partnerships are in place (e.g. Tourism Grading Council, Peace Parks Foundation) Opportunities Opportunity for expansion of protected areas to 322,000ha by FIFA World Cup Regional cooperation to form a Southern African Tourism hub Establishment of Songimvelo-Malalotja TFCA and World Heritage Site Global and national demand for improved biodiversity management Job creation/led demand Opportunities for financing through Payments for Ecosystem Services, Carbon Credits, REDD KNP tourists overflow + ecotourism growth Municipal initiatives Resolution of land claims Weaknesses Degraded infrastructure for biodiversity management Game populations depleted by poaching Inadequate business systems and ICT (cross-cutting) Vacancies and loss of experienced personnel (crosscutting) Poor public image and reputation (cross-cutting) Poor security of tenure in PAs Inadequate budgets for PAs Insufficient skills and capacity in PA management Unskilled employees not gainfully employed Tourism infrastructure on PAs degraded Lack of security for visitors to PAs Market intelligence w eak LED Weakly developed No organised mainstreaming LED M&E system lacking Know ledge Management unit capacity loss Threats Constrained tourism infrastructure in Mpumalanga and single commercial air carrier Tourism routes poor Land claims unresolved and restitution delayed Major land use challenge in Mpumalanga especially mining, commercial forestry and urbanisation Continuing security problems on PAs State Forests transfers from DWAF unfunded Uncertain state of the Blyde Canyon complex Monopolistic structure of tourism industry Unfunded mandates for parks previously belonging to Limpopo and are now under care of MTPA 13

14 4. MTPA s Strategy 4.1. Business strategy With the CEO now in office, MTPA has adopted a clear strategy, with the vision of Mpumalanga, your World Class Tourism Destination The defined mission is to provide an integrated Tourism and Biodiversity Conservation Management system in order to stimulate sustainable economic growth for the Province. The MTPA will focus it s energies (human capital) and its assets and resources to create jobs, facilitate transformation, provide community empowerment and skills transfer as part of the 2014 Macro Vision of the Country. The business strategy has the initial 102 Days Quick Wins Programme, a turnaround strategy for the Agency. Key pillars of the turnaround strategy are: Financial efficiency and sustainability Institutional capacity building Restructuring the business fundamentals of MTPA Limited reliance on the Provincial Grant funding Increased income generation levels Reduced salary costs Increased marketing spent Increased staff training budget allocation Increase spent on maintenance and infrastructure Alignment of the strategic, financial and operational dimensions of the MTPA business Contribution to economic growth and development in the Province Create a humanised workplace environment. The Strategic and Annual Performance Plan , with the accompanying Balanced Scorecard (which is the performance management tool), takes the MTPA into the future. The Quick Wins Programme included a number of Key Focus Areas, to address urgent issues to be resolved to assure immediate progress. These include: The Mpumalanga Protected Area Expansion Strategy The drafting of Settlement and Co-management Agreements for seven prioritised Land Claims Protected Areas namely, Songimvelo, Mabusa, Mthethomusha, Manveleti, Loskop Dam and Blyde Nature Reserves, have been drafted The infrastructure audit on all PAS in partnership with the CSIR has been completed For Mpumalanga tourism destination marketing, the Johannesburg Marketing Satellite Office was launched in March 2009 and the Cape Town Marketing Satellite Office is to follow soon R9 million has been allocated for infrastructure upgrade at the Manyeleti Game Reserve, inclduing the upgrade of 35 km fencing, of 20km gravel road, provision of bulk services, and the renovation of staff accommodation 14

15 The Songimvelo Nature Reserve Social Responsibility Programme (EPWP) was launched on 21 February R7.8m has been allocated by DEAT towards this project. With this strategy in place, key aspects of organisational development have been resoled, including a detailed organogram, and completion of a full job sizing Ensuring sound governance A full range of measures is in place to ensure the good governance of MTPA. A Shareholder s Compact between the MEC and MTPA confirms the Agency s statutory mandate, the strategic objectives to be attained by the Agency during the period of the Shareholder s Compact, and the Key Performance Areas and Indicators to measure the agency s performance during the period of the Shareholder s Compact. The MTPA Act established the Board as the governing body of MTPA. The Board is fully functional, with several Committees, and supported by the Company Secretary in MTPA. The Board has approved a Delegation of Authority, which includes assignment of responsibility of Accounting Officer to the CEO. The Board has further approved the Shareholder Compact, the Board Charter, the Corporate Governance Guidelines, the Communications Protocol and the Code of Ethics for MTPA staff members. An Audit Committee holds financial oversight of MTPA. The prior difficulties during the merger to form MTPA resulted in a disclaimer audit report by the Auditor General in These matters have since been addressed and MTPA received a qualified opinion in 2008 (dated 31 July 2008). (The basis for the qualification resulted from the disclaimer of opinion in 2007 which prevented the Auditor General from establishing opening balances for the 2007/8 financial year.) MTPA has seen to the full deployment of the provisions of the Public Finance Management Act (PFMA), supported by the requisite policies and procedures, and has established a proper assets register, fleet management system, and other appropriate instruments of control Strategic interpretation of MTPA s mandate and MTPA s objectives Addendum 2 provides a full interpretation of the mandate of the MTPA, considering not only the MTPA Act but also the provisions of other relevant statutes, such as those in the NEMA family. With the consolidation of environmental management and protection in the new portfolio of Economic Development, Environment and Tourism in Mpumalanga, execution of its mandate is now much simplified. \ The statutory mandate has the following elements that determine the overarching functions and outputs of the organisation: 1. Biodiversity conservation: S3(2)(a) and (b) (...the Agency shall a) provide for the effective management and conservation of biodiversity and ecosystems within the province; and b) develop and ensure effective management of protected areas ) 2. Tourism marketing: S3(2)(c) (... the Agency shall- c) foster, promote and sustainably develop and market tourism; ) and S4(9)(a-f) (Provincial policies, programmes and regulations; monitoring, evaluating and ensuring the 15

16 implementation of, and compliance with policies, programmes and regulations; international, regional and domestic marketing strategies; etc) 3. Tourism business development: contribute to S3(2)(c) (... the Agency shall- c) foster, promote and sustainably develop and market tourism; ) 4. The cross-cutting function of LED support: contributions to local economic development (LED): S3(2)(d) (... the Agency shall- d) promote and create socioeconomic growth and transformation within the tourism and conservation industry, thereby creating economic and employment opportunities for previously disadvantaged individuals and local communities in the Province ) 5. Compliance functions: diverse provisions 6. Research and information functions (Knowledge Management): S4(11) in relation to tourism, and S(14)(4)(a) in relation to biodiversity management and conservation. 5. MTPA core functions and services Table 3 below lists the Strategic Business Units in MTPA and their principal functions. Table 3. Strategic Business Units in MTPA and their principal functions. Strategic Business Unit Key functions Chief Executive Officer Strategy, direction, control, organisation climate and development, etc Chief Governance and Compliance Officer Senior Manager: Wildlife Protection Services Risk Manager: Risk, Internal and Environmental Audit Company Secretary: Secretariat Senior Manager Legal Services: Legal Advice Senior Manager: Registration and Regulation Senior Manager: Security Services Chief Corporate Support Officer: Manager: Corporate Communications Corporate Support Services Manager: CEO s Office Senior Manager: Information and Communications Technology Senior Manager: Information Management Senior Manager: Know ledge Management [Biodiversity] Senior Manager: Strategic Research and Tourism Information Services Manager: Administration Manger: Social Responsibility Chief Human Resource Officer: Human Resource management Chief Financial Officer: Financial Management Chief Operations Officer: Core Operations Chief Conservation Officer: Biodiversity Conservation Chief Tourism Business Development Officer: Tourism Business Development Chief [Destinations] Marketing Officer (Johannesburg) Manager: Corporate Events Manager: Human Resource Management Manager: Human Resource Development Manager: Employee Relations Manager: Financial Management Manager: Supply Chain Management Manager: Assets Direction and management: Biodiversity Conservation, Tourism Business Development, and Tourism Destination Marketing Senior Manager: Wildlife Business Development Senior Manager: Protected Areas Manager: Parks Establishment and Expansion Director: Blyde River Canyon National Park Senior Manager: Social Ecology Senior Manager: Skills Training & Aw areness Senior Manager: Product Development Manager: Tourism Investment Promotion Manager: Concessions Manager: Infrastructure Development and Maintenance Brand Manager: Destination Branding (Johannesburg) Manager: Trade Relations (Johannesburg) Manager: Business Tourism Manager: Events This Business Case derives from an examination of the mandate and outputs required from MTPA (sections 2 and 5.2 above), the degree to which the organisation is currently 16

17 positioned to fulfil its mandate, and the degree to which it is resourced to address emerging requirements relevant to its mandate MTPA has a range of legacy problems to address, such as in communication, the promotion of public awareness and education, and the improvement of stakeholder relationships. For all of these MTPA is now well resourced. The organisation is now poised for a significant growth phase, and is resourced to meet current commitments. However, to position itself to address identified threats and opportunities, MTPA requires new and additional funding that will ensure that it is able to meet its public-service commitments under the challenges emerging in Mpumalanga. Addendum 3 provides detail. The new funding is required to address six areas of challenge and growth: Funding of the proposed infrastructure upgrade. In Biodiversity Conservation: o Expansion of Provincial Protected Area (PA) land to 322,000ha by 2016, as envisaged in the Mpumalanga Protected Area Expansion Strategy (MPAES), through the implementation of a land acquisition fund o Adjustment of conservation area funding to the Kwazulu-Natal and Western Cape benchmarks. This includes full funding of the previous Limpopo parks and the capacity to complete and manage the MPAES and the Songimvelo-Malalotja TFCA (new entity; see details below) and embed these into the Conservation Management function o An expanded Biodiversity Stewardship function, to deal directly with stewardship as well as supporting DEDET in certification of PA management plans for tax rebates, in mitigation offsets, and other instruments arising from the National Grasslands Programme (NGP) o Increased capacity to fast-track the land claims resolution strategy. Tourism Destination Marketing o Increase marketing expenditure from 12% of budget, to 30% in 2016 o Implement the 2010 FIFA World Cup Strategy. Tourism Business Development o Increased capital resources to grow external income to 40% of total operational come o Establishment of a tourist business concession unit o Implementation of the SMME and second economy intervention strategy. Other general requirements: o Compliance functions relevant to biodiversity and tourism: an additional Green Scorpion anti-poaching function o Knowledge Management An increment to the budget for scientific capacity in biodiversity for SANBI/NGP interfaces A capital investment to upgrade ICT and extend effective ICT to PAs and research groups 17

18 o Cross-cutting institutional development requirement: additional funding for training and organisational development to provide for 10% of total budget to go to training, from the present 3%. 6. Ability of MTPA to Spend Funds MTPA received a qualified opinion in 2008 (dated 31 July 2008), as discussed in the Executive Summary to this document. In 2007/8, MTPA currently managed a budget of R190 million. It is therefore an organisation that has proved itself capable to manage a significant amount of public funding. 18

19 7. Call on Funds 7.1. Financial projection Table 4 summarises the financial projections for MTPA for the period 2009/ /15. The total income projection (consisting of both operating expenditure (OPEX) and capital expenditure (CAPEX)) increases from R190 million in 2008/9 to R815 million in 2014/15. The greater part of this increase is attributed to a significant amount of capital investment, firstly to deal with a maintenance backlog, secondly to improve tourism facilities within the PAs (see Capex Request Income Optimisation in Table 4), and thirdly to establish a land acquisition fund in support of the MPAES (see section 7.4 below). Table 4. MTPA financial projection 2009/ /15. Operating and Capital Income and Expenditure (R'000) Past Budget Current Budget Adjusted estimate of Funds Estimate of Funds from the Provincial revenue from the Provincial revenue Fund infollowing MTEF Fund in current MTEF 2008/9 2009/ / / / / /15 TOTAL INCOME (OPEX AND CAPEX) 190, , , , , , ,485 TOTAL INCOME FROM PROVINCIAL REVENUE FUND 168, , , , , , ,150 Proposed baseline allocation from PRF - OPEX (April 2009) 168, , , , , , ,489 Income from PRF - Manyeleti Claim 17,652 Income from PRF - SMME special project 12,360 Income from PRF FIFA Special Project 94,720 Income from PRF - Adjustment of Conservation Budget (with impl of MPAES) 15,800 23,433 34,254 45,951 58,732 72,676 Total Income from PRF - CAPEX 113,846 56, , , , ,985 TOTAL OTHER INCOME 21,500 33,656 38,549 46,619 54,221 58,560 63,335 Own Income 21,500 33,656 38,549 46,619 54,221 58,560 63,335 Donor Funding EPWP or other SA Programme Income TOTAL EXPENDITURE 190, , , , , , ,485 TOTAL OPERATING EXPENDITURE (CURRENT) - 258, , , , , ,404 Salaries 161, , , , , ,082 Overheads 54,892 66,857 66,457 72,086 75,690 79,475 Operational costs 42,360 49,505 53,122 56,097 58,902 61,847 TOTAL OPERATING EXPENDITURE (ADDITIONAL) , , , , ,096 Salaries 25,132 38,430 46,772 55,889 65,842 Overheads 9,576 12,455 13,579 14,828 16,216 Programme budget / Operational costs 17,240 41,491 48,061 55,227 63,038 Programme budget / Operational costs: SMME Strategy 12,360 Programme budget / Operational costs: 2010 FIFA Special Project 94,720 63% 66% 66% 66% TOTAL CAPITAL EXPENDITURE - 113,846 56, , , , ,985 CURRENT CAPEX REQUEST 113,846 56,261 36,963 6,329 8,228 10,696 Small equipment (Baseline allocation) Vehicles (Baseline allocation) 1,827 2,740 3,562 4,631 6,020 7,826 Furniture and fittings (Baseline allocation) ,014 1,318 1,714 2,228 Staff quarters maintenance (Non-recurrent allocation) 5,300 5,000 4,050 Signage (Non-recurrent allocation) 5,000 Roads (Non-recurrent allocation) 30,725 14,448 8,527 Fencing (Non-recurrent allocation) 19,488 9,164 5,409 Buildings and Centres (Non-recurrent allocation) 21,702 10,205 6,023 Bulk infrastructure (Non-recurrent allocation) 6,643 3,124 1,844 Tourism facilities (Non-recurrent allocation) 22,492 10,576 6,242 CAPEX REQUEST - INCOME OPTIMISATION - 44,740 44,804 10,764 Blyde 29,149 29,149 Loskopdam 15,590 Mabuza 7,828 Manyeleti 7,828 Mthethomusha 1,022 Songimvelo 9,742 CAPEX REQUEST -LAND ACQUISITION 204, , , ,524 Phased purchasing of 102,000ha from 2010/ /17 204, , , , Adjustment to baseline allocation MTPA proposed, in April 2009, and adjusted baseline allocation to the then Mpumalanga Department of Economic Development and Planning (DEDP) as set out in Table 5 below. This Business Case is an extension of this proposal, but maintains the same Call on Funds as Baseline Allocation. The Business Case extends the financial projection for MTPA into the next MTEF period (to 2014/15) and in addition, includes budgets for key non-recurring interventions (see section 7.3 below), and also makes provision for a significant growth in and management of Protected Areas. 19

20 Table 5. Proposed baseline allocation adjustment (as presented by MTPA to DEDP dated April 2009) DETAILS 2008/2009 (incl Nov 08 (R 000) adjustment) 2009/ / /2012 Operational Costs per MTEF& including own revenue per Above 214, , , ,000 Implementation of key MTGS deliverables - 15,650 18,780 22,536 Infrastructure Development (including signage) 5,300 5,000 4,050 - Staff quarters maintenance - URGENT; 95,700 45,000 26,560 - Overall Infrastructure Compensation of employees grading per annum ,800 15,180 16,698 Manyeleti (Salaries and Overheads-) 14,363 15,800 17,830 19,118 TOTAL REQUIRED BY MTPA DURING NEXT MTEF PERIOD 228, , , ,962 NETT BASELINE ADJUSTMENT REQUIRED FOR MTEF (14,363) (146,250) (101,790) (88,962) 7.3. Non-recurrent allocation The outputs of Table 4 are separated into baseline allocation and non-recurrent allocation items in Table 5. Non-recurrent OPEX items include an amount of R17.6 million outstanding on expenditure on Manyeleti in 2008/9, a R94.7 for the 2010 FIFA World Cup, and R12.4 million to implement the SMME and Second Economy Support Strategy. Nonrecurrent CAPEX items include the infrastructure upgrade programme as proposed to the then DEDP in April 2009, and in addition, a capital investment programme, from 2012/ /15 to develop new tourism facilities within the Protected Areas. This upgrade programme aims to achieve income optimisation through increasing visitation to more than 500,000 visitors per year and to increase tourism expenditure accruing to MTPA to more than R60 million per year by 2014/ Growth in baseline allocation The growth in baseline allocation is set out in Table 5, with steep relatively growth in 2009/10 and 2010/11 expected Land acquisition fund Table 4 contains a proposed CAPEX budget item for the development of a Land Acquisition Fund. As there is no precedent for such a Fund, this Fund is proposed to be negotiated as a special purpose vehicle between MTPA and Treasury, with the sole purpose of supporting MTPA to achieve its PA targets as set out in the MPAES. This may mean that the Fund becomes part of the national land acquisition programme, and do not form part of this Call on Funds. 20

21 Table 6. Summary of baseline allocation and non-recurrent expenditure Operating and Capital Income and Expenditure (R'000) Past Budget Current Budget Adjusted estimate of Funds from the Provincial revenue Fund in current MTEF Estimate of Funds from the Provincial revenue Fund infollowing MTEF 2008/9 2009/ / / / / /15 TOTAL INCOME FROM PRF 168, , , , ,868 1,033,837 1,054,831 Baseline income from the PRF 168, , , , , , ,861 Baseline OPEX allocation from the PRF (with impl. Of MPAES) 168, , , , , , ,165 Baseline CAPEX allocation from the PRF - 2,497 3,745 4,869 6,329 8,228 10,696 Growth in baseline allocation 33% 43% 16% 8% 8% 8% Non-recurrent income from the PRF - 131, , , , , ,985 Non-recurrent OPEX allocation from the PRF - 17,652 94,720 12, Non-recurrent CAPEX allocation from the PRF - 113,846 56, , , , ,985