South Africa has strong political, economic, cultural and social ties with its former coloniser, the United Kingdom. The financial markets suffered as a result of the turmoil in the aftermath of the historic referendum for the United Kingdom to leave the European Union. Brexit has implications for the South African economy, and South Africa must focus on what it can control.
Market turmoil will be the order of the day and the financial services industry in South Africa must ensure that it engages its clients to stay calm. South Africa has been experiencing a currency crisis as the rand has been losing value against major currencies. This has had negative impact on the inflation and economic growth moving from pedestrian to snail pace growth. South Africa is likely to enter a recession as the economy won’t grow more than 1% this year.
South Africa imports more than it exports, and this has led to a huge trade deficit as a percentage of GDP. The economy depends on foreign direct investment to drive growth, in line with the country’s export led economic policy. The economy is also suffering from the job shedding occurring in mining as the commodities prices have plummeted, and labour costs have increased, increasing the cost of doing business. The unemployed and the employed are faced by the rising costs in South Africa as the rand weakness has increased the cost of living.
The South African Reserve Bank has been on an interest rate hiking cycle as inflation has been a challenge to manage, trying to balance economic growth and protecting the value of the rand. The majority of JSE listed companies are sitting on record amounts of cash in their bank accounts, refusing to invest in the economy, and create the necessary jobs, we hope the BMF will engage on this issue very soon.
The loss of value for the rand, means that South Africa becomes much more attractive as a value for money destination. Tourism is an export product that is consumed at the destination area, because it is a service that is simultaneously produced and consumed. This means that the majority of the value adding can happen within the country, if the industry is majority owned by South Africans, this is in stark contrast to the export of raw material and the import of the final product that is so prevalent in the mining sector.
South Africa has adopted a flexible currency model, therefore when the loss of the value of the rand occurs, we must arm ourselves with an understanding that it’s time to sell South Africa more. South Africa is practically on “SALE”’ and we must give tourism a greater share of the national budget so that it can market South Africa. Tourism needs marketing to succeed, as would be tourists must be captured with aesthetically appealing images of the great wonders that await their imminent arrival in South Africa.The return on investment on increasing the national budget for tourism will be increased jobs, for an industry that is labour intensive. Another benefit will be an improvement of the large currency account, as tourists bring their hard currency laden wallets to enjoy themselves in the country.
Tourism is the only industry that has the ability and potential to create a plethora of labour intensive jobs that can change the gloomy reality of poverty caused by lack of employment and high levels of inequality. Tourism is the “new gold”’ as it produces more foreign exchange receipts than gold mining.
In order to grow our tourism economy, we must be ambitious enough to consider the consumption economy of tourism to have the same political weight as the security cluster. The UK is the number one international inbound tourism market to South Africa according to Stats SA’s Tourism and Migration April 2016, with 18.4% of all tourists, while Europe as a whole produces 58.8% of tourists to South Africa.
The Post Office Travel Market survey revealed that South Africa is the third cheapest destination for UK tourists after Portugal and Bulgaria. As Brexit caused a depreciation of the rand, we must counter the negative impacts by ensuring that we spend more money marketing South Africa to the world, to attract a greater number of tourists. These tourists can counter the decline in the South African economy and ensure that unfreedoms of unemployment are erased from our collective memory.
Unathi Sonwabile Henama is tourism lecturer at the Tshwane University of Technology