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How to boost South Africa’s tourism

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South Africa’s tourism industry has had a tough time of late. The optimism after the 2010 World Cup has given way to pessimism following the visa regulations saga that did nothing but hurt the local tourism industry. A rough calculation on recently released tourism numbers suggests that the additional rise in tourism numbers from the World Cup (on which South Africa spent billions) was completely nullified by the new visa regulations. Thankfully that blow has now been softened by changes to the regulations.

Tourism is vital to South Africa’s economy, often more so than other industries, for at least two reasons: It is labour-intensive, and this labour is often female and unskilled; for roughly every 9 tourists that visit South Africa, one job is created. More importantly, its impact is spatially dispersed. Whereas labour-intensive manufacturing is almost always concentrated in large metropolitan areas, tourists travel not only to Cape Town but also to Clarence, Clanwilliam, or Coffee Bay. In a research paper published in Local Economy, Gareth Butler and Christian Rogerson reports the results of interviews with black employees of tourism establishments in Dullstroom, a Mpumalanga retreat known for its fly-fishing and agribusiness. The authors find that most employees are recruited with little more than a high school certificate, but then gain valuable skills through on-the-job training (mostly improving their computer literacy) or, for some, more formal tertiary qualifications, including university degrees paid for by the employers. In short, the tourism sector provides opportunities in areas where there are few alternative income sources.

So what can be done to increase the numbers of tourists visiting South Africa? The most obvious answer is: make it as easy as possible for foreigners to temporarily enter our country. Enough has been written about the absurd visa regulations and their harmful effects. Let me just add this: in an attempt to prevent child trafficking, the regulations has hurt far more South African children by reducing the income (possibilities) of their mothers, women who would have found work in the tourism industry had more tourists been allowed to enter. TS Eliot’s ‘most of the evil in this world is done by people with good intentions’ comes to mind.

Making it easy for tourists also includes better and affordable transport to the country. More flights might require competitive airport landing slots. So, too, would efficient and safe border posts. And once they are here, allow them to use services that they trust, like Uber taxis and Airbnb accommodation (with the upshot of even more dispersed beneficiaries).

Advertising can help. Many countries try to boost their international image, for example, by hosting events. South Africa did this in 2010 with the FIFA World Cup and will do so again in 2022 with the Commonwealth Games. The tourism increases from the World Cup, as María Santana-Gallego and I show in a Journal of Sports Economics paper, was large and continued for a few years after the event. But a new paper in the Journal of Economic Perspectives by two gurus of sports economics, Robert Baade and Victor Matheson, warns against hosting mega-events. They find that ‘in most cases the Olympics are a money-losing proposition for host cities; they result in positive net benefits only under very specific and unusual circumstances’. Moreover, ‘the cost-benefit proposition is worse for cities in developing countries than for those in the industrialized world’. Ouch. Those who dream of a Durban or Johannesburg or Cape Town Olympics better take note.

Industry support, as with other economic sectors, seems to be of little help; often, the best governments can do for exports (tourism is formally: travel service exports) is to ensure a safe and open business environment. One of the first reactions to the Paris attacks in November last year, for example, was the fear that terrorism will harm France’s massive tourism industry. Paris was the world’s third most visited city in 2015. France remains, by a large margin, the world’s most visited country. Travel and tourism services contribute 9.1% to its GDP (South Africa is slightly higher at 9.4%, but significantly below New Zealand, for example, at 17.4%).

The fear seems justified: of course tourists would prefer to travel to places where they are less likely to be killed, or mugged, or even required to pay a bribe. And in a recent working paper, I (with María Santana-Gallego and Jaume Roselló-Nadal) find exactly that: a 1% increase in the ratio of terrorist attacks per 10 000 inhabitants reduce tourist arrivals by 2.3 %. We also measure the link between crime, corruption and tourism. We find that the effects of terrorism and crime are greater for leisure tourism than for business tourism but that corruption affects only business tourism.

Safety and security remains a central concern when traveling to South Africa. And even though the statistics show that tourists are safe, the perception of safety is what matters most. (Consider the actual versus perceived threat of Ebola. Trevor Noah did his best to dispel those misconceptions.) But the good news is that we also find that tourists from more unstable countries are more tolerant of terrorism, crime and corruption in the destination country. The rapidly expanding middle classes of China and especially India (cricket!) offer excellent opportunities for the South African tourism industry; on aggregate, the perception of crime and corruption, the statistics show, will have less of an effect on their decision to travel.

South Africa has many wonders to delight leisure and business tourists. Let’s welcome them with open borders and convenient regulations. And if you’re in the tourism industry, perhaps it’s good to shift focus to new markets where perceptions of safety and security are less likely to play a deciding role.

*An edited version of this first appeared in Finweek magazine of 16 June.

Written by Johan Fourie

July 15, 2016 at 05:58

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