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The tourism benefit of Brexit

Weaker rand makes South Africa more attractive as a value for money destination.

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

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COMMENTS   14

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Touting a weak rand as a good thing for the tourism industry is equivalent to advocating war to boost the health industry. One can go too far in the traditional South African quest to find something positive in every blatant disaster.

@Pistov – think this is a case of ‘making lemonade when served lemons’.

I think they missed they point completely. Economies change and as the mining industry has far passed it’s peak it is an ideal time now, due to the weaker Rand to capitalize on this. China has reduced its demand for precious metals while Europe has increased its demand for different destinations. “WHEN SERVED WITH LEMONS, MAKE LEMONADE.”

Really? We are suppose to bring tourists anyways due to currency weakness. the issue however is unstable leadership high crime rate and angry citizens who burn cities just because they feel like it. The same reason we don’t get investors is the same reason no one wants to visit, not because its cheap. Its like telling someone Iraq has a weak exchange rate, so go visit for a holiday it’s cheap.

I agree that tourism has great potential for employing far more people than now and the cost of job creation is far less than in the manufacturing or mining sector. The Rand has been weak for a very long time and tourism has not been increased faster than other popular destinations. In my opinion the biggest problem is security. Tourists do not like the idea of staying in their hotels after dark. In any of the popular tourist spots around the world, from the Spain to Thailand the streets are full of people after dark, while in SA you have to drive everywhere to be safe. If you talk to foreigners they seem to be surprised that in the hotels and guesthouses they are warned not to walk around the streets in the dark. Unfortunately I do not expect any improvement, if in the last 20 years security has not improved what is the chance that things will improve in the next 20 years?

Yea Hun your right — but if you are a good tourist operator you work around that problem — take the guys to the malls — straight to Sun City or the game farm ect —I still think tourism is our way out of inevitable decline !!!

Clearly @Pistov and @pietpip you guys didn’t read the article and went staright to the comments section. What is written here, is that in light of the weaker Rand more focus should be put into promoting SA as a destination due to favourable exchange rates for Europeans. This is much the same as your lack of inability to travel to Europe because it is more expensive now and you would rather travel east or stay put. Come on guys…

Wrong. You’re putting a positive spin on a negative story – just like the author did. Sure, the piece does advocate spending more to encourage visitors to a progressively declining economy. It also states “The loss of value for the rand, means that South Africa becomes much more attractive as a value for money destination. ”
I don’t see any of this as good news; rather it confirms South Africa’s descent to being little more than a tourist attraction, somewhat in the mould of a traditional Zulu village. Personally, I’m not in a rush to master gumboot dancing for a living.

Pistov my man — thats how life work there is always a positive and a negative way to look at things this I promise you ! In Afrikaans we say ” n bedekte seen ” directly translated it means a blessing in disguise — this is that . trust me ! Tourism is the way to go for us , this country is beautiful beyond believe and the people and their different cultures will step up with dignity and grace as the time demand . Yes we have mountains to climb but challenges is what life is all about . If your general outlook is negative you will believe that everything is negative meantime it is just life — not easy ( it has never been ) !

Devils advocate – there’s a third way to look at things that may not have occurred to you: the realistic way. And for goodness’ sake change your pseudonym to Pollyanna – it’s so much more appropriate.

SA Tourism must tap into the lucrative Chinese market, but they need to get Home Affairs on-board….

You are right on man —- tourism can kill it for us if we go about it the right way !

So tourism is going to save SA?

A weak currency will never help SA in the long term

Aah Bra — tourism CAN help, big time, to save SA ! You know how beautiful this country is — how cool people of this country can be — with the right leadership ( not there right now -granted ) we CAN wow the world — we just have to do it ourself work for making SA become a bigger tourist destination — 13 million SA tourist a year at the moment , 90 million tourist a year go toFrance and to Spain and about the same amount to England ( 90 x 3 ) thats 270 million people ( the market of just 3 big tourist countries ) — can you imagine how big is the market world wide ? how big is the possibility of the pie piece we get ??? TOURISM CAN SAVE SOUTH AFRICA !

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