Mr Garth Strachan, members of the standing committee, invited guests, representatives of industry, labour, civil society and government, participants and officials, good morning and thank you for the opportunity to address you today.

In my budget speech delivered to the provincial parliament last week I indicated that the positive employment trend in the tourism sector was likely to persist and that we needed to support this trend. I also reflected that tourism (together with financial and business services) was reflecting a high growth pattern in terms of contribution to the GRP and therefore needed our support.

In real terms I reflected this support via a budget allocation of R32,9 million for tourism with R25 million being allocated to our Destination Marketing Organisation (CTRU) and R 7,9 million to my Department of Economic Development to execute tourism programmes.

Whilst having made these commitments, the sector has important challenges that it faces in terms of meeting the needs of transformation targets within the sector and within the larger paradigm of the need for South Africa to transform.

My task this morning is to briefly reflect on some of these challenges.

Tourism is seen as a key sector for job creation, economic growth and wealth creation. However, as South Africa and indeed the Western Cape, experiences economic growth from tourism, this has to be accompanied by specific interventions to address the ever widening gap between various strata of our society

Investment in this sector therefore has to address

• The need for economic growth
• The need to address the gap between rich and poor, rural and urban, black and white

A failure to address these issues simultaneously could result in growth which will lead to more socio-economic disparities a few years down the line. I am arguing here that growth without equity will set us back in our bid to rebuild our country.

It is therefore imperative that activities and interventions of government have to look for the confluence of these two broad areas of influence i.e. growth and equity.

With this in mind, the department of economic development has a vision of "? a Western cape which offers dignity, equity, and prosperity to all those who make it their home " - in line with the national growth and development strategy vision and the strategic thrusts of Ikapa Elihlumayo.

In terms of the approach of Ikapa Elihlumayo there are five broad strategies which are being developed:

• The development of a Strategic Infrastructure Programme (SIP)
• The development of a Provincial Spatial Development Framework (PSDF)
• The development of a micro economic development strategy (MeDS)
• The development of a HRD framework
• The development of a plan to build social capital.

Whilst the growth and development of the tourism sector is informed by and informs, all of the above strategies, it is in the area of the economy that the greatest challenges abound.

Whilst tourism growth in terms of volumes and turnover appear to be on the increase , equity remains an elusive partner.

Primarily then for the tourism sector we are looking at two kinds of equity distribution: The first being spatial or geographic distribution of benefits and the second being demographic distribution.

This is not as easy as it first appears in the context of tourism, as whilst we are experiencing increase in tourism traffic and expenditure, this has not been accompanied by the concomitant distribution of benefits. In my view trickle down economics is not an effective distribution mechanism in the tourism sector.

Some of the problems in this regard include the following:

• Traditional ownership in the industry is largely in the hands of White South Africans as before 1994 the various tourism sites and activities were not open to people of colour. This means that HDI's are not familiar with the business of the formal tourism economy as compared with traditional sectors like fishing, construction or clothing - activities HDI's have engaged in for hundreds of years , both informally and formally. This places prospective new HDI entrants at a distinct disadvantage in the sector.
• The tourism product is not tangible - you are selling an experience rather than an object this means that persons buying the product will be relying on who they do business with rather than on what the product looks like i.e. they have to trust the business person before they can trust the product- this is a hugely limiting factor for new entrants
• The product is not repeatable - if we are making a physical product and it breaks it can be replaced. In tourism if for example an operator arrives late to pick up a tourist the experience is spoilt and in most cases cannot be repeated. Thus, the seller of the product has to be trusted on a service level - indeed the seller of the product and the product itself are intertwined i.e. the seller is part of the product.
• Tourism is a product where production and consumption of the product take place at the same site. For example if I make cellphones I can sell them to any market in the world. If one market tires of my product I can sell it to another market. In tourism the market has to be brought to the product. This places limitations on us as traditionally we are served by a few primary and secondary markets and these have to be extensively mined. Marketing to totally new areas is expensive and, because the industry is based on trust and new markets take time to build. It also means that we are limited by physical infrastructure - e.g. the place being visited must be accessible - tar roads are required for liability insurance for tour busses. This has to be taken into account when planning for the future.
• The product is also high risk and open to the vagaries of the market and world events e.g SARS, Middle East Wars, September 11th, Tsunami'stc. Whilst these events could have a current beneficial effect on our destination as we escaped all of these, one incident within the heartland of our tourist mecca could shift the balance entirely.

What this also means is that it is not enough to just supply a service . The supply must be linked to demand via some distribution channel. Unfortunately many of these channels are closed networks and penetration is hard.

This will therefore mean that we need a strategic approach to penetrate this industry, intervene favourably for new entrants, create a suitable environment for the growth and development of business and ultimately achieve our goal of benefits for all.

It will also mean that in order for real growth to take place important partners already in the industry will have to be engaged, to share the vision of economic growth and the distribution of benefits,

In addition it becomes necessary for government intervention, in order to shift the axis of development towards poorer communities and stimulate growth in areas and contexts not traditionally covered.

These are some of the strategic challenges we face and our progammes are gearing up to meeting these in an integrated way.

Some of these programmes include:

• The development of the integrated tourism development framework (ITDF)
• The development of the BEE charter and scorecard
• The development of the Tourism Enterprise development programme,The development of the Integrated Tourism Entrepreneurship support programme (ITESP)
• The development of the marketing framework in an inclusive and equitable manner
• The development of marketing platforms for SMME's
• The development of tourism routes and products across the province

to name but a few of our initiatives.

The detail of these will be presented to you by both Brent Walters and Noki Dube in later presentations

Given the need for growth accompanied by equity and the specific idiosyncracies faced by this sector, I am of the view that rather than use a heavy handed stick approach we need to engage in a shared vision for a shared future in a home for all.

I invite you all to join me in seeking shared solutions to the pressing challenges we face. Let us join hands in ensuring that indeed we offer dignity, prosperity and importantly equity in the place we call home.

I thank you.