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Views expressed in this report do not necessarily represent the views of the Inclusive Society Institute or those of their respective Board or Council members. All records and findings included in this report, originate from a panel discussion on developing a new economic blueprint for South Africa, which took place in August 2022
Author: Mariaan Webb, Creamer Media Writer
Edited by: Daryl Swanepoel
AUGUST 2022
Content
Abbreviations & acronyms
Introduction
Identifying weaknesses
• Inadequate understanding from government
• Insufficient public- and private-sector cooperation
• Volume over value focus
• Price-differentiation strategies
• Policy implementation challenges
• Domestic airline failures
• Aviation certification delays
• Monopolistic tendencies
• Brand reputation neglect
• Infrastructure failures
Suggestions for fostering growth
Conclusion
References
Abbreviations & acronyms
ACSA Airports Company South Africa
GDP gross domestic product
ISI Inclusive Society Institute
SMME small-, medium-sized and microenterprises
Stats SA Statistics South Africa
SA Tourism South African Tourism
TSA Tourism Satellite Account
UNWTO United Nations World Tourism Organization
WTTC World Travel and Tourism Council
Introduction
Tourism is of vital economic and social importance to many countries around the world. Before the Covid-19 pandemic, which led to drastic changes in people’s mobility, travel and tourism accounted for one in ten jobs (330-million) globally and 10.30% of the world’s gross domestic product (GDP) (WTTC, 2022a).
Tourism is also a valuable contributor to the South African economy. Measured against other industries, tourism’s direct contribution to GDP is bigger than either agriculture, utilities (electricity, gas and water) or construction. The ‘Tourism Satellite Account (TSA) for South Africa’ report, compiled yearly by Statistics South Africa (Stats SA), states that the sector’s direct contribution to GDP was 3.70%, or R209-billion in 2019, before the pandemic crushed the sector (Stats SA, 2021).
To measure total contribution of travel and tourism to GDP, TSA relies on data from the World Travel and Tourism Council’s (WTTC’s) country report for South Africa. WTTC calculates the sector’s direct and indirect contribution to the economy in 2019 to be 6.90%, or R363.20-billion (Stats SA, 2021).
Direct contribution of tourism to GDP: 2015 – 2019
Source: Tourism Satellite Account for South Africa, Statistics South Africa
Travel restrictions implemented by countries to stop the spread of Covid-19 had a major impact on the tourism industry, cutting across all subsectors, from accommodation to aviation. South Africa’s borders were closed from the end of March 2020 to September 2020, preventing tourists from visiting the country. The emergence of new variants of Covid-19 in June and July 2021 also impacted on tourism as many countries prevented their citizens from traveling to South Africa. The UK government, for example, developed a red list, which comprised countries to which its citizens were prohibited from travelling. South Africa was on the red list from May 2021 to October 2021.
The WTTC country report estimates that the total contribution of travel and tourism to GDP declined by 55%, to R180-billion, in 2020. As pandemic restrictions eased, tourism rebounded and is estimated to have contributed about R195.20-billion to South Africa’s GDP in 2021 (WTTC, 2022b).
Tourism has been identified in the National Development Plan as being of economic priority given it is a labour-intensive sector that could contribute to achieving job creation targets. However, despite its recognised potential, the industry believes that government does not fully recognise or value tourism’s importance as an economic contributor.
The Inclusive Society Institute (ISI), in collaboration with the Tourism Business Council of South Africa, convened a tourism sector dialogue in June 2022 as part of a broader research project to develop a New Economic Blueprint for South Africa. The dialogue was attended by a wide range of organisations representing various subsectors within the tourism industry in the country, including the hospitality sector, the airline industry, travel agents, destination marketing agencies and hotel, resort and game lodge establishments.
This report gathers the tourism industry’s views on what South Africa must do to remove constraints to economic growth and development in the sector and offers suggestions on what could be done to accelerate and expand tourism’s contribution to GDP growth.
Identifying weaknesses
Inadequate understanding from government
Although statistics highlight the sizeable contribution of tourism to the South African economy, there is a view that government does not fully recognise the importance of tourism to the country’s economy. Having a national Tourism Ministry is not enough and the success of the industry has relied on various departments working together. There is often a lack of trust between departments, preventing government from operating efficiently.
Inefficiencies in departments, often other than tourism, can have major implications for the industry. For instance, the Department of Transport’s backlog in issuing operating licence renewals to tour operators, or the regulations imposed by the Department of Home Affairs when it introduced unabridged birth certificates for minor children travelling through any port of entry, can have unintended consequences for tourism.
While government must do more to show its understanding of and appreciation for tourism, the industry is also required to accelerate processes of inclusion and black economic empowerment so that owners and operators better reflect the racial demographics of South Africa.
Insufficient public- and private-sector cooperation
Although the Covid-19 pandemic has assisted in fostering closer cooperation between the public and private sectors, this is an area that remains of great concern to the industry. There is a lack of collaboration between the Department of Tourism, its marketing arm, South African Tourism (SA Tourism), and the private sector in crafting tourism strategies. For instance, there is a view that marketing strategies are developed from a political angle rather than with a commercial slant and, therefore, lack sufficient opportunism. Focusing too much on BRICS countries (Brazil, Russia, India and China) is perceived to be politically opportunistic, but it does not deliver the commensurate commercial dividends.
Volume over value focus
Government’s tourism growth agenda focuses too much on volume, and not enough on value. SA Tourism’s aspirational target is to reach 21-million tourist arrivals by 2030, although that goal had looked out of reach even before the Covid-19 pandemic. SA Tourism now believes that attracting 14.80-million visitors is a more “realistic target” for 2030 (SA Tourism, 2021).
However, the consensus was that instead of focusing on visitor numbers and trying to be “everything to everyone”, South Africa must position itself as a destination that attracts “valuable” visitors who spend money throughout the value chain. It must also guard against overtourism or placing its infrastructure under pressure.
Price differentiation strategies
Safari camps, luxury lodges and many other supreme tourist destinations dropped their prices and offered South Africans discounted rates when international travel was not possible while Covid-19 travel restrictions were still in place. To revive the tourism industry, price differentiation strategies must be employed more broadly to encourage South Africans and other Southern African Development Community residents to explore the country. The Industrial Development Corporation, in partnership with SA Tourism and the Tourism Business Council of South Africa, recently launched a travel campaign to that effect. As part of the campaign, South Africans will be able to secure discounted rates of up to 35% to selected destinations across the country (Engineering News, 2022).
Financial constraints mean that more South Africans are opting to take local holidays than travelling overseas. A recent poll by consultancy group Travel Lifestyle Network indicated that 67% of those canvassed have a domestic holiday once a year or more and 22% once every six months. With the rising cost of living, price is going to be a key differentiator to attract consumer spend in the remainder of 2022 and 2023 (Business Day, 2022).
Policy implementation challenges
South Africa has an abundance of policy documents, positions and pronouncements, but often these do not yield the desired results, owing to a lack of consistent implementation. The lead up to the 2024 general election will likely compound implementation challenges, as a new government will be elected in less than a year-and-a-half. Implementation success hinges on continuity and a new administration may pursue or prioritise different interests.
Domestic airline failures
The failure of Comair, the operator of low-cost carrier kulula.com and British Airways, which it operated under a licence agreement, was a major setback for the tourism industry. The company was responsible for 40% of domestic airline capacity before its closure in June 2022 (BusinessTech, 2022).
Comair failed to secure funding to stay airborne after being impacted on by global pandemicrelated travel restrictions. However, the group’s problems started before Covid-19, when the Boeing 737 Max aircraft was grounded, and its fleet-renewal programme pushed up debt and debt service costs. Placing South African Airways (SAA) in business rescue in 2020 was another major setback for Comair, which at the time was still owed R790-million by the State-owned carrier as part of a Competition Commission settlement. SAA ran an incentive scheme for travel agents in the early 2000s, which was found to penalise Comair. After SAA went into business rescue, it was ruled that Comair could get back only 7.5c in the rand of the R790-million still owned to it by SAA (Fin24, 2022a).
SAA itself resumed operations only in late 2021, having been in business rescue for almost two years, which had a substantial impact on business and leisure travel. SAA’s predicament was caused by several issues, including political interference and leadership turmoil.
The liquidation of Comair has substantially reduced domestic seat capacity, exacerbating a crisis in the industry, which over the past two years also lost low-cost carrier Mango Airlines.
While other operators will eventually fill the gap left by Comair and Mango, capacity constraints have pushed up ticket prices, further hampering the tourism sector’s recovery from the pandemic. Operators of domestic airlines have warned that ticket prices will remain high owing to the price of fuel (Fin24, 2022b).
Aviation certification delays
Authorities are slow to process aviation certifications, which is a significant obstacle for the air travel industry. Every aircraft that an international airline uses on a route to South Africa must be registered and this process is taking too long. An aviation sector participant in the ISI dialogue indicated that it takes the South Africa Civil Aviation Authority several months to issue an airline operating certificate, compared with six days in Germany, for instance.
Monopolistic tendencies
Some of the key services pertaining to aviation and airports, such as Airports Company South Africa (ACSA) and Air Traffic and Navigation Services, are monopoly State-owned entities. There is no visibility on how ACSA, for instance, is ensuring that it gets the most out of its existing assets.
Brand reputation neglect
There is concern about the ongoing damage to the South African brand as a safe and welcoming tourism destination. Civil unrest and violent crime, especially near popular tourism sites, such as the Kruger National Park, exacerbate perceptions that South Africa is an unsafe destination.
Infrastructure failures
Delipidated road infrastructure and poorly maintained buildings do not support tourism growth.
Many small towns near or on route to key tourist sites are in decay due to poor service delivery and inadequate maintenance resulting from municipal failure. Tourists no longer support towns where streets are riddled with potholes and litter is strewn everywhere. The poor quality of provincial roads in popular tourist hotspots is also of concern. Tourism industry participants have been complaining for years about the poor state of roads in the picturesque Mpumalanga Lowveld, for instance.
Suggestions for fostering growth
Focus points to accelerate tourism industry growth
Encourage public–private collaboration | It is critical to encourage more collaboration between the public and private sectors. The private sector is considered as the key to get the wheels of the tourism economy rolling. |
Bridge the communication gap | Government engages with the private sector when it is well organised. Through representative bodies, the private sector must communicate a clear message to government about how tourism can contribute to economic growth and to job creation, particularly for the youth. The industry must stimulate continuous dialogue, with not only government, but also the various players in the sector. |
Create a clear government agenda | To drive economic growth, create job opportunities and rebuild the middle class, government must be clear in terms of its agenda at every department level. This should include investment in upgrading and maintenance of roads and other tourism-related infrastructure. |
Invest in education and skills | Focus on rebuilding capacity by investing in learning and skills development. |
Leverage technology | Technology is constantly evolving, and South Africa must ensure that it keeps up with rising digitisation and technological developments. |
Collaborate on safety measures | It is critical that South Africa provides a level of comfort to tourists regarding personal safety. Collaboration is needed to establish mechanisms to better ensure safety for would-be visitors. |
Improve South Africa’s brand | Tackle Afropessimism to overcome unconscious biases about the continent and the country. This requires a government with political appetite to take up the challenge. Brand reputation is not something that can be done by the private sector alone. |
Provide an energy security strategy | Government must provide a clear strategy for energy security, particularly regarding jet aviation fuel. A shortage at the country’s main airport recently led to several international flights diverting and some being cancelled. |
Relook bilateral agreements | South Africa is a signatory to several bilateral agreements to advance its tourism objectives. Investigate whether there are possibilities to improve on what has been provided for in those agreements. |
Revisit immigration policies and improve visa regime | South Africa’s immigration policies are very security oriented and could potentially be more liberal. The country also needs to improve its visa regime. Suggestions include issuing more visa waivers and recognising visas from other countries. |
Draw in more SMMEs | By virtue of its geographic distribution and low barriers to entry, tourism generates opportunities for small-, medium-sized and microenterprises (SMME). These businesses are often considered the backbone of the industry. To accelerate growth, increased SMME participation is crucial. |
Conclusion
Tourism continues to recover at a strong pace following the Covid pandemic. Globally, destinations welcomed three times as many international arrivals in the first quarter of 2022 as in the same period of 2021. The World Tourism Organisation’s ‘UNWTO World Tourism Barometer’ forecasts that there will be a gradual recovery in tourism throughout 2022, as more destinations ease, or lift, travel restrictions and pent-up demand is unleashed (UNWTO, 2022).
South Africa’s tourism figures are also encouraging, with tourist accommodation income rising by 83% in the first quarter of 2022. Income from hotel accommodation doubled in the first quarter, compared with the same quarter of 2021 (Stats SA, 2022).
For South Africa to take full advantage of the tourism rebound, collaboration between government and the industry is of critical importance. The country must pitch itself to the right clients and polish its brand to ensure that visitors choose or continue to choose South Africa, and that when tourists do arrive on South African shores they enjoy a world class experience, with full safety and security and supported by adequate tourism-related infrastructure and facilities.
References
BusinessTech. 2022. Flight costs in south Africa are up 50% – and could go much higher after Comair loss, June 23, 2022. [Online]. Available at: https://businesstech.co.za/news/lifestyle/599518/flight-costs-in-south-africa-are-up-50-and-could-go-much-higher-after-comair-loss/ [accessed August 24, 2022].
Engineering News. 2022. IDC launches domestic tourism campaign to stimulate economic recovery, August 4, 2022. [Online]. Available at: https://www.engineeringnews.co.za/print-version/idc-launches-domestic-tourism-campaign-to-stimulate-economic-recovery-2022-08-04 [accessed August 24, 2022].
Fin24. 2022a. How Comair ended up in a battle for survival, June 2, 2022. [Online]. Available at: https://www.news24.com/fin24/companies/explainer-how-comair-ended-up-in-a-battle-for-survival-20220602 [accessed August 24, 2022].
Fin24. 2022b. Why flights are so pricey right now, July 31, 2022. [Online]. Available at: https://www.news24.com/fin24/companies/its-not-the-comair-gap-why-flights-are-so-pricey-right-now-20220731 [accessed August 24, 2022]
South African Tourism. 2021. Annual Performance Plan 2021/22, March 22, 2021. [Online]. Available at https://static.pmg.org.za/SA_Tourism_2021-22_ANNUAL_PERFORMANCE_PLAN.pdf [accessed August 18, 2022].
Statistics South Africa. 2021. Tourism Satellite Account for South Africa, final 2017 and provisional 2018 and 2019, November 30, 2021. [Online]. Available at: https://www.statssa.gov.za/?p=14992 [accessed August 18, 2022].
Statistics South Africa. 2022. Statistical Release: Tourist accommodation for March 2022, June 2, 2022. [Online]. Available at: https://www.statssa.gov.za/publications/P6410/P6410March2022.pdf [accessed August 18, 2022].
United Nations World Tourism Organization. 2022. Tourism recovery gains momentum as restrictions ease and confidence returns, June 3, 2022. [Online]. Available at: https://www.unwto.org/news/tourism-recovery-gains-momentum-as-restrictions-ease-and-confidence-returns [accessed August 24, 2022].
World Bank. 2022. Worldwide Governance Indicators, 2022. [Online]. Available at: https://info.worldbank.org/governance/wgi/Home/Reports [accessed August 18, 2022].
World Travel and Tourism Council. 2022a. Economic Impact Report, 2022. [Online]. Available at: https://wttc.org/Research/Economic-Impact [accessed August 18, 2022].
World Travel and Tourism Council. 2022b. South Africa Country Report, 2022. [Online]. Available at: https://wttc.org/Research/Economic-Impact/moduleId/704/itemId/204/controller/DownloadRequest/action/QuickDownload [accessed August 18, 2022].
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This report has been published by the Inclusive Society Institute
The Inclusive Society Institute (ISI) is an autonomous and independent institution that functions independently from any other entity. It is founded for the purpose of supporting and further deepening multi-party democracy. The ISI’s work is motivated by its desire to achieve non-racialism, non-sexism, social justice and cohesion, economic development and equality in South Africa, through a value system that embodies the social and national democratic principles associated with a developmental state. It recognises that a well-functioning democracy requires well-functioning political formations that are suitably equipped and capacitated. It further acknowledges that South Africa is inextricably linked to the ever transforming and interdependent global world, which necessitates international and multilateral cooperation. As such, the ISI also seeks to achieve its ideals at a global level through cooperation with like-minded parties and organs of civil society who share its basic values. In South Africa, ISI’s ideological positioning is aligned with that of the current ruling party and others in broader society with similar ideals.
Email: info@inclusivesociety.org.za
Phone: +27 (0) 21 201 1589
Web: www.inclusivesociety.org.za
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