MAGIC Travel, an
agency that does a
large amount of its
business with government
clients, has gone into
business rescue.
“I have been informed
that it might be the
agency’s government
accounts that haven’t been
paid, but I cannot confirm
that until I have reviewed
all of the information,” says
Koos Benadie, business
rescue practitioner of NVS
Inc., who confirmed the
agency’s current financial
distress.
At the time of going to
print, the agency was yet
to have its first meeting of
creditors to determine how
they would proceed and
were thus legally unable to
comment.
Ceo of Asata, Otto de
Vries, commenting on
Magic Travel’s current
financial situation, says:
“It has been the agency
that has battled the most
to get payments out of
government and is one of
the members for whom
Asata has worked closely
with Treasury in an effort
to help recover outstanding
payments.”
“I’m not surprised to
hear that Magic Travel is
in business rescue. We’ve
warned government that
some of us would have to
close shop, and now it’s
happening,” says one travel
agent, who spoke to TNW
on condition of anonymity.
“Not only are we
bleeding money because
of their decision to cut all
commissions and overrides,
but whatever is due to us in
outstanding payments from
government is also being
delayed.”
Following government’s
announcement of a
standard remuneration
model in March (see TNW
March 23/30), TMCs doing
government business were
given notice to restructure
their business models and
submit new service fee
proposals to make up for
any loss of income as a
result of the government’s
move to scrap overrides.
By the end of May,
National Treasury was
expected to publish a
tender, with the aim of
selecting a panel of 10
TMCs that would be
approved to deal with
government travel (see
TNW April 13). Asata said it
was unaware of this tender
being published. This panel
is expected to be selected
by October this year.
TMCs working with
government have submitted
their proposals for
temporary service fees until
the new panel is selected.
However, TNW’s source says
government has not reacted
to the proposals.
“We’re not getting any
compensation but we’re
still providing the service.
These are the ‘unintended
consequences’ of the
government’s ill-thought-out
decision.”
“Government has
essentially put a lot of
BEE businesses, which
they wanted to support
and grow, into some hard
financial times,” says Lance
Smith executive sales of
Avis Budget South Africa.
The car-rental company has
yet to meet with Treasury to
discuss where government
would like to take their
transfer and vehicle rental
spend.
According to Otto, there is
currently a lot of confusion
between suppliers,
TMCs and government
departments and a lack
of certainty around what
policy to apply and which
rates to use. He explains
that despite ongoing efforts
by Asata to get updates
and engage with Treasury
on changes to trave
policy and outstanding
payments to travel agents
with government accounts,
Treasury is not responding
to any of Asata’s requests.
Says Otto: “Nobody knows
what rates are meant to
be applied. Nobody knows
from when these rates are
supposed to be applied.
New rates are being
withdrawn, new rates being
brought in, new rates being
held back and the old rates
being used again.”
However, suppliers deny
that there has been any
‘confusion’ with regard to
the agreed fares or rates
since April 2016, and
have welcomed the new
regulations and policies.
Brian Kitchin, Comair’s
executive manager sales,
says Comair is pleased
about the prospects of the
new regulation as it will
level the playing field when
it comes to government
business.
Brian says Comair has
filed new deals for both
National and Provincial
Departments to reflect the
nett fares. “These fares are
based on the deals initially
agreed to with National
Treasury,” he says.
Spokesperson for SAA,
Tlali Tlali, told TNW he was
not aware of any confusion
or fluctuations in fares
since SAA agreed on its
‘gross’ fares with Treasury.
The hospitality industry,
on the other hand, has
seen some changes in
rates. Although government
had initially implemented a
R1 300 spending cap,
on April 1, the Treasury
adjusted the maximum
rates in line with the
star grading of the
establishment and
services provided. This
was stipulated in the new
National Travel Policy (NTP),
which was circulated to
government departments.
Alastair Dooley, divisional
director of finance at the
City Lodge Hotel Group,
says this resulted in the
rates for the lower star
categories being capped
below the R1 300 limit.
However, maximum rates
for four- and five-star
properties were higher
than the previous R1 300
limit. Because certain
departments had then
implemented the new NTP
and others hadn’t, some
rates were revised to limit
the number of queries on
the rates, says Alastair.
He says the policy
is expected to be fully
implemented by all
government departments by
June 30 and as a result, we
may see rates move once
all entities subject to the
circular have implemented
the revised policy.
