Government tightens belt another notch

THE travel sector will
feel the impact of more
government spend cuts
over the next two years,
following Finance Minister,
Nhlanhla Nene’s, address
at a meeting hosted by
the American Chamber of
Commerce earlier this month.
Planned government
expenditure on travel will be
cut by no less than R555m in
a bid to manage the country’s
escalating budget deficit.
He said: “We just need two
years to rebuild fiscal space
that we lost during the crisis.
We have to slow down the
growth of government debt.
To do otherwise would be to
place our achievements over
the past 20 years at the mercy
of fickle global markets.”
Adriaan Liebetrau, SAACI
ceo, says the cost containment
measures imposed by the
government are among the
main challenges facing the
travel industry in 2015.
He says government budgets
will be reduced on the back of
the rate cap that was already
introduced by government
with the last interim speech
in October last year, making
it compulsory that officials
pay no more than R1 300 for
accommodation, breakfast,
dinner, parking, the tourism
levy and other services.
“The interim budget speech
strongly suggests that budgets
will become even tighter
with income tax increases
inevitable if we are to reduce
the budget deficit.”
A spokesperson for the
marketing division at BCD
Travel says the travel industry
in general will feel the impact
of the measures announced
by government. “Hotels have
realised that if they don’t
comply with government rate
cuts, they will have empty
beds. Flights are still full but
cheapest tickets are required,
not fully flexible tickets.
International and any businessclass
travel are monitored
very strictly. There has been
a curb on conferences, and
the number of employees
attending workshops and
conferences has been
reduced.” The cost-cutting
initiative will cause a drop in
turnover but not transaction,
BCD Travel’s spokesperson
adds.
Managing spend
The upside of government’s
efforts to establish a better
understanding and a firmer
grip on travel spending is
that the National Treasury
has started working closely
with Asata to develop a travel
procurement framework for
government and to track and
recover outstanding payments
due to Asata members.
Otto de Vries, ceo of Asata,
says: “The aim is to initially
deal with long outstanding
payments and to ensure that
an acceptable mechanism is
in place to deal with these
issues, as and when they
arise. This, combined with the
other work we are doing with
National Treasury, is designed
to streamline and improve our
members’ working relationship
with government.”
Since discussions between
Asata and Treasury began
in May, the joint project has
delivered a code of conduct,
MOU and the process
around the categorisation of
government departments and
TMCs. This includes tenders,
process workflows, best
practice and a travel policy.
The project’s key objectives
include:
Compliance with Treasury
regulations with irregular
and/or unauthorised
expenditure. Wasteful
expenditure related to
no-shows, last-minute and
non-essential travel, resulting
in outstanding payments
totalling millions that trickle
down the supply chain of
services.
Budget deficits as a result
of inaccurate tracking
of expenditure and
misallocations that result
in a direct impact on the
country’s economy.
Government’s requirement
for a benefit of scale,
resulting in the best return
on investment, value for
money and a grading of
TMCs to qualify and quantify
companies to handle the
array of travel arrangements
undertaken by government
officials.
“The joint project is compiling
the executive summary that
Treasury can present to the
minister to highlight what has
been achieved to date and
what benefits will translate
from the project,” Otto says,
adding that Asata has also
established a case log to
better track outstanding
payments and assist treasury
in helping industry recover
overdue payments.