IN AN effort to save R25bn a year
through stricter management of its
procurement policies, government
is in direct talks with travel suppliers
to renegotiate rates and save on
commissions that go to travel agents.
According to a government
statement, there are currently more
than 40 travel agents doing business
with the state, earning R1bn in
commissions. Of these, three travel
agencies receive collectively
R550m in commissions annually.
When three travel agencies dominate
due to non-competitive factors, such
as political connections, they are
operating like an oligopoly, says former
Satsa ceo, Michael Tatalias. “That is
never a good thing,” he says, adding
that this sort of monopoly situation is
ripe for abuse.
“National and provincial government
spend approximately R10bn annually
on travel and subsistence. Of this,
R4,5bn is spent on domestic air
and land travel and accommodation
services. Travel management
companies are receiving approximately
R1bn a year in commission, rebates,
overrides and other volume-driven
remuneration from suppliers –
discounts that are not passed on to
government,” Phumza Macacanda,
spokesperson for chief procurement
officer, Kenneth Brown, told TNW.
“In order to overcome the
fragmentation, duplication of effort
and differing pricing models, the
Office of the Chief Procurement Officer
(OCPO) will be issuing a national
travel policy that will govern public
sector travel behaviour; enter into
corporate agreements directly with
airlines, hotel and accommodation
establishments, car-rental companies
and many more on strictly nett and
non-commissionable prices.”
According to Phumza, the
OCPO will implement a
standard remuneration model
to be used when government
departments appoint travel
agents from a panel of
qualified agencies that is
still to be put in place. He
explains that all rebates,
overrides or volume-based
remuneration by government
departments and suppliers
to TMCs will be discontinued
for government business as
of April.
Government has been
in contact with suppliers
to ensure complete
transparency, says Clifford
Ross, ceo of City Lodge Hotel
Group. “We have had to
provide government rates to
the Treasury, which excludes
all commissions, overrides
and rebates.”
According to Clifford, this
is a positive development for
the travel industry as rates
will now be transparent for all
government departments –
national, provincial and local
– on a centralised database.
“The rate package you see
is the rate package you pay,”
he says.
Transparency will, hopefully,
result in quicker payment from
government to the industry on
bill-back to TMCs, as all three
parties – government, TMCs
and suppliers – will know
exactly what rate is being
charged, he adds.
“It should make it simpler
and allow for fewer middlemen
to pollute the waters,”
says Michael Farr, adding that
the process will be a lot more
efficient and allow hotels to
reduce wasted margin as
well as provide the rooms at
efficient rates.
The problem with the
initiatives government is
putting in place is that they
create a perception that all
commissions and fees are
bad, says former Satsa ceo,
Michael Tatalias. “Travel
agents work hard for their
fees. Cut the channel out,
whether travel agent or tour
operator, and you get a less
efficient industry.”
Asata told TNW it was
engaged with Treasury in
sensitive discussions and
was unable to comment.
