Small-town tourism knocked

Real people in towns dependent on tourism will be without income for weeks, with weak prospects after the lockdown.
The allure of any small holiday town is the big choice of small interesting restaurants that each keep a few people employed and in total offer employment to thousands. Image: Moneyweb

It’s easy to forget that economics is not really about a bunch of abbreviations, figures, tables and graphs, or economists dressing up in charcoal suits and crisp white shirts to present their predictions of the economy in a upmarket auditorium in front of an equally suited 200-odd people who know the exact difference between the GDP, GNP and GNI (or pretend to).

The economy is not about figures and letters, but rather the study of people. It’s about how they react to their environment, their plans and being happy.

Economists reduce it to numbers, but human behaviour, fuelled by emotions and hard work, will always be the bedrock of economics.

Most people realise the economic fallout of the coronavirus outbreak will affect the economy, and that it will affect a lot of people’s ability to work and earn money. It will not only reduce economic activity during the current three weeks of lockdown, but also thereafter.

Statistics South Africa’s latest Quarterly Labour Force Survey (QLFS), based on research completed during the last quarter of 2019, gives an indication of how many people will be affected. Stats SA uses 10 industry categories for its research, and the number of employees in each serves as a good indication of how many people will be affected. Many already are.

Employment by industry

Employees
Community and social services 3 792 000
Trade 3 249 000
Finance 2 568 000
Manufacturing 1 720 000
Construction 1 350 000
Private households 1 286 000
Transport 1 011 000
Agriculture  885 000
Mining  430 000
Utilities  120 000
Total* 16 420 000
* Total includes other industries not shown in the table

Source: Stats SA QLFS, Q4 2019

One can assume that all mineworkers and construction workers are sitting idle at home, as are most of the employees in the manufacturing sector except for those involved in the food processing industry. Most will return to work, but retrenchments seem unavoidable given prospects of low economic growth in 2020.

Read: Unpacking the SMEs funding procedure

The biggest industry as far as employment is concerned, labelled community and social services, employs nearly 3.8 million people. It includes those employed in the healthcare industry, many of whom continue to work.

Zero income likely for many

However, the bulk of the rest – hairdressers, personal trainers, restaurant owners and employees, piano teachers, car mechanics and whoever owns or works for a small independent business – will probably earn nothing during the current three weeks of forced unemployment.

The tourism industry, for years regarded as one of the most important growth sectors for reducing unemployment in SA, is one of the hardest hit.

Travel and tourism stopped, immediately and totally, when Covid-19 began to spread.

After a busy few weeks of local activity over the December holiday period, foreign tourists usually continue to arrive from the middle of January to around the end of May.

This is normally the good time for local businesses and SA. Tourists from Germany, Austria, Canada, Korea, the Middle East, China, Japan and Britain bring wallets full of strong foreign currency to eat, drink, sleep and play.

Importantly, this is new money from outside of SA’s borders. It is not local money that we merely shuffle around between us.

This money is the stuff that actually makes SA and its citizens better off; we ‘export’ pleasurable holidays.

Now there is nothing.

Not only did tourists immediately cancel their holidays and reservations, most of the early arrivals booked out immediately and headed home on the next available flight.

Unfortunately, tourism is also a sector that sustains a lot of small businesses, independent operators and individuals plying their trade.

Few big employers

There aren’t many big manufacturers along the Garden Route south of Port Elizabeth to Cape Town; just a lot of smaller towns and villages relying on tourists. The same holds true going north from PE towards St Lucia, or north from Cape Town towards Port Nolloth.

The ability to earn an income has changed for most of the inhabitants of these tourists towns, as a quick look at any of the small towns along the Garden Route shows. And it is unlikely to improve quickly. Tourism will recover slowly even after the pandemic passed on.

When guest houses emptied as soon as the world realised the danger of the virus, it left employees and independent workers in the lurch.

One entrepreneur has (or had) a nice little business venture after the guest house owner agreed to outsource the kitchen and preparation of all the meals to him. He would buy all the ingredients and prepare breakfast for up to 40 guests. He would also entice the visitors to try local dishes for dinner, including the favourite – and nearly compulsory – traditional braai. A margin was added to the best wines from Stellenbosch and Franschhoek, acquired from a small distributor.

The guest house, one of the biggest and most popular on the beach, was fully booked until the end of May. Those bookings have all been  cancelled.

The same goes for the other guest houses in the street, and on all the other streets.

In addition, guest houses, hotels and health spas in the area all employ seasonal workers. These people and their families rely on the few busy months every year to pay school fees and buy new car tyres.

Big step, a hurdle, then shutdown

Another casualty is the owner of a small pub and restaurant. He took the big step of getting a loan and buying the small vibrant restaurant where he has been employed for years. A bit of money to clean it up and reorganise a few things created an appealing venue – only to be hit a few weeks later by the regulations banning the sale of alcohol after 18:00, and now a total shutdown.

The last few weeks had already been difficult, with the drop in tourist numbers. The latest developments have made things worse. He will not be able to pay rent at the end of the month. Shutting down for the next three weeks means no income for him or his landlord.

He is not the only one. The allure of any small holiday town is a big choice of small interesting restaurants that each keep a few people employed. In total, they offer employment to thousands in SA.

Even the bigger and more profitable restaurants will suffer. If the largest restaurant in town is able to afford to pay its permanent employees during these difficult months, the larger legion of casual staff is likely to be left without income.

Suppliers just as hard-hit

Suppliers to restaurants and related retailers have been hit just as hard. A large number of micro-businesses supply restaurants and the interesting roadside stalls with everything from wine, craft beer, condiments, dried fruit, pastries, tasty breads, crafts and art.

A friend built up a nice niche business producing and selling chilli sauce to restaurants, shops and farm stalls. His orders and income disappeared overnight, leaving him with no recourse to UIF or other emergency funds as he isn’t a salaried employee or a small business owner employing other people.

Everybody involved in tourist activities at this level, from the airport shuttle driver to small operators offering adventure activities, will be without income for the time being.

This includes those who offer tourists paragliding rides, sail boat excursions, canoe rentals, mountain bike trails, quad bike rides, archery, paintball and bicycle rentals, as well as the small shop selling cool drinks and sweets.

In short, most of the residents in such a tourist town are without an income for most of the month. Hopefully things will return to normal soon, but indications are that most will have to do with much lower income for the foreseeable future.

Events cancelled

Knysna Tourism has cancelled a number of events, including the RS Tera World Sailing Championships in April and the Knysna Motor Show scheduled in May. The popular Pink Loerie Mardi Gras and Arts Festival scheduled for April/May, which attracts visitors from all over SA, has been postponed.

Oudsthoorn has cancelled the popular Klein Karoo Nasionale Kunstefees, which draws thousands to the dry Karoo town and brings in tens of millions in income to the local tourism industry.

Wild Info, a privately-owned tourism information bureau servicing the Garden Route towns of Plettenberg Bay, Knysna, Oudsthoorn, George and Mossel Bay, has experienced the cycles of the tourism sector for the last 12 years. Owner Jacques Pratt says the past Christmas season was actually quite good, but bookings by international travellers declined immediately soon after the outbreak of the coronavirus in China.

“At first it looked as if the slack would be taken up by local tourists, but the initial steps to limit public gatherings to 50 people and restrictions on the sale of alcohol reduced expectation. Tourism imploded when government announced the lockdown,” says Pratt.

He expects little reprieve in the short term, saying that stakeholders need to take urgent steps to rebuild the sector.

“It will be years before we see the number of foreign tourists we have welcomed lately.”

Cornelis van der Waal, chief research officer of Wesgro (which is focused on Cape Town and Western Cape tourism, trade and investment), says it is hard to say how much the industry will be impacted or how fast the recovery will be.

“The simple truth is that everyone in SA and the world will remember the first half of 2020 as one of the largest human and economic crises of recent history.

“Before the crisis, there were approximately 175 000 people employed in the tourism sector in the Western Cape, a lot of them along the Garden Route as a result of the natural beauty, product offering and amazing climate.

“Tourism was doing very well in the Garden Route at the start of the year. January and February saw strong growth in the demand for hotel beds [more than 7%],” says Van der Waal.

He also notes that April is typically the month when international tourists come to SA to spend their dollar and euros.

“Since all international flights have been cancelled it is clear it will have a significant negative effect on the industry.”

Economists might label them entrepreneurs, survivalists, small businesses or self-employed. They are mostly forgotten about against the glare of our fascination with the multi-billion dollar companies of the JSE Top 40.

But together they are just as big and just as important as the large listed retailers.

Listen to Nompu Siziba’s interview with Victor Kgomoeswana:

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COMMENTS   19

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On top of this you have the high crime rate in Sa, which keep people away

which will exacerbate..

exacerbate what?

It is a shock how many businesses and individuals have NO safety net (and apparently therefore trade on extremely thin margins or blow their margins)

It sickens me that companies like TFG can now claim hardship and expect suppliers and landlords and government to cough up, but last year paid one exec almost R50m.

Is there a case to be made for a mandatory kitty?

People will howl about it as it will probably have to be state run and there will be huge concerns about fraud, but how about this:

SARS levies a small fraction for example as an additional portion on net VAT (diff between output and input). or a small levy on PAYE. Talking small as in say 1% of the amount.

It is NOT state income, it is forced savings

This is credited to ALL individuals or businesses and the aggregate is invested in a safe fund with appropriate hedging against domestic disasters.

There would need to be rules about accessing it and under what circumstance. Maybe in cases of specific disasters the fund could lend more than the owner’s balance – eg in a regional drought or a specific industry disaster like ostrich disease or whatever.

No, I am not a socialist, I am the poster child for capitalism – Ayn Rand is my hero. Pity we have not seen real capitalism in a hundred years. But maybe this is a bit like forcing people to wear seatbelts

Or how about companies which exercise share buy backs, but now rely on a bail out from tax payers. Predominately in the USA, but still sickening.

Past behaviour is the best indicator of future behaviour. So please, I will not donate a cent more to be looted. With children in alchohol sales, tourism and the construction sector, all of whom will in all probability soon be out of work, or have their small businesses fold, my husband and I will soon have 8 more mouths to feed, grandkids included. A year before we were to retire (no more). Retirement funds already decimated by now and the rest soon be looted, I’m sure. So donate whatever you like to whom you like, stop handing out other peoples’ money to proven thieves.

Griet – I am not advocating donations. My scheme would add 1% of the taxpayers’ net VAT or PAYE to a forced savings account.

Best wishes for your extended family 🙁

Lots of great ideas but only relevant where the custodians are honest and I do not believe there are too many of these in SA. My idea is even more free market. Let the company stash the 1%. But my over riding feeling having seen Steinhoff, Tongaat, Sasol, M&R, Esor and a few others is; do not invest in SA domiciled companies. If not crushed by the ANC regime, AA and BEE, the directors, wanting to retire fat and happy, will screw you.

Very true & hard hitting! Worryingly & sad.

Yet, reporting on such woes is in fact ‘no news’….it was expected. What did the President (with his advisory team) expected to happen, when the lock-down decision was made?

I remind taxpayers to compile a vast achive of such similar articles, as the time will come when a SARS auditor will request you “please provide reasons as to why your business income reduced, compared to prior years”

Then you can respond to SARS, referring to the list of supplied articles and state “pick any one!” (it will be more polite than responding “What the @#%$?”)

Very good advice. Thanks

You have been very quiet. Do you not have internet at home?

SA has prided itself on being a natural resources and tourism based economy. With no focus on manufacturing, beneficiation or service excellence centers this is not surprising.

Small-town tourism in SA was already knocked by ANCmismanagement, lack of investment and corruption, now this.

Small town tourism started dying 25 years ago, the moment ANC councillors took them over. These people were teachers, health workers etc with no experience of running anything. They were cheque pullers, now they saw all the money coming in they decided it was time to reap.

No water, no sewage, no electricity,no station, everything and I mean everything fell apart. Ask me I know I come from a small town, too embarrassed to show people my little rural dorp.

Then the doctors left, the chemist closed and now the banks are leaving. another great ANC success story.

The ANC has also killed so many small coastal towns in the Eastern Cape.

Could have been a golden egg for them, but that would require too much real work, and we know how they feel about that.

…client of mine retired in Port Alfred some years ago. Wanted to take family there on holiday visit last year, but my client said “No. Please spare us the embarrassment” describing to me how the town sadly declined 🙁

@pwgg. I wonder which town you referred to(?)

Please, don’t be embarrassed…you’ll be surprised how many city dwellers trekked from a rural town in their lifetime.

Could be mistaken, but you live in KZN?

On my side, have in-laws in NW telling me how Mahikeng as a city declined in service delivery. Previously Mafikeng, and before that Mafeking. In Afrikaans word dit ‘n “stat” genoem in stede van “stad”.

Mahikeng/Mmabatho is a fore-bearer of whereto other major cities in SA will ‘develop’ towards.

Sadly this is the first proper article talking about the real disaster unfolding in the country. Every other economist and political commentator (Is there even such a thing) talks about the JSE etc. They all just babble along telling us the things we already know about the wonderful fund managers that are so much cleverer than us and about the V-shaped recovery they expect and how we should all just sit on our hands and not do anything. Just wait a few months and everything will be hunky dory again.
This guy ate least talks about the real issue – that of the small business and self employed that will get no help

What a sad article. But alas this too shall pass.

End of comments.

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