Johan Fourie's blog

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Posts Tagged ‘Olympic Games

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

Africa 2050

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I had the opportunity recently to talk to a group of local and international students about Africa’s past and current development trends; an economic history peep show of everything from the neolithic revolution and Jared Diamond, through slavery, colonialism, independence, and dictatorship, to the rapid growth of the last decade. As a final assignment, I asked the following question: This is the year 2050. Write a history of African development, 2010-2050.

Perhaps because we are an optimistic species (and because our generation believe that the future is malleable, that we have agency to affect change), the general impression I get from reading the students’ responses is that our children will live in a better Africa than the Africa of our parents and the Africa of us. This, I want to emphasise, is a remarkably different world than the one inhabited by our great great grandparents, who could wish for little more than that most of their offspring live to childbearing years. In good times, this happened. But when famine or war or disease struck, the best one could hope for was survival. This is certainly not the future of Africa that my students envisage, however. According to the sample of experts in my class, the Africa of 2050 will be an improved, more prosperous place to live.

Several themes appeared repeatedly: a more stable political environment, investments in power generation, better transport and telecommunications infrastructure and greater skill levels. US-student Matthew DeAngelis writes:

After access to electricity became essentially universal, high-speed Internet access was quick to follow. While much of Africa is still using slower broadband connections rather than the faster fibre optic technology which is the standard in most of the world, this access to information has quickly and cheaply revolutionized almost every aspect of African life. First, the Internet has changed education in Africa. Historically, rural Africa has faced a problem with its schools not being able to afford basic libraries or educational materials. As computers and Internet access became incredibly cheap in the 2020s, these schools now had access to knowledge which was simply unimaginable previously. This access to information allowed hundreds of millions of Africans to get the basic education necessary to pursue careers in skilled and semi-skilled industries, and was one of the most important factors in lifting rural Africa out of poverty.

Second, as more jobs were created in online companies, a lot of employment became decentralized, and many Africans began working online from home. This meant that people no longer had to move to the cities to find decent employment. With basic skills and a decent Internet connection, one could make a living practically anywhere in the world. This opportunity for employment meant that many rural families now had the education and the money to begin sending their children to receive tertiary educations. While the vast majority of students attending university are still urban and upper class or middle class, many more poor and rural students are receiving degrees from technical colleges. The employment prospects for individuals with these degrees have been very good since Africa’s technological revolution, as semi-skilled and skilled labour is necessary to maintain and upgrade the existing infrastructure.

While some of highlighted the rise of industries, Ama Serwaa Kusi of Ghana believes Africa’s success will be due to investments in agriculture:

The continent at this stage even though still remains agriculturally-oriented, has implemented the necessary technology to better assist production. Agriculture-tech schools have been established in many of the countries, where young men and women are taught how to operate on large scale of lands with complex and simple technology, which is effective. A larger percentage of other agricultural workers are those who have studied abroad in Scandinavian countries and have come back to successfully implement the ideas they have studied overseas. Due to this, brain drain has rapidly dropped in many of these African countries and has successfully contributed to production.

South Africa’s Nandipha Piliso believes Africa will also finally realise its comparative advantage in tourism:

Africa, has over the past forty years established itself as a major tourist destination, this has also influenced the continent’s economic growth. The tourism industry has led not only to economic growth but also a commitment to the establishment of infrastructure. Greater investment into infrastructure ensured that the continent was and still is capable of hosting tourists from across the world. After the 2010 Soccer World Cup that was hosted in South Africa, tourism increased not only in South Africa but on the continent as a whole. Many African leaders realised that hosting international sporting events was the best way to further increase tourism on the continent. In light of this, African leaders united and decided to help the city of Durban in South Africa bid for the 2024 Olympic Games. The games were hosted successfully; once again the continent experienced a boom in tourism. Other African countries were encouraged to bid, although Africa has not hosted another Olympic Games, countries such as Morocco and Kenya are hopeful that they will be hosting the upcoming Olympic Games on the continent.

Through private-public partnerships, says US-student Jorgia Hanlin, these economic gains will also translate into better living standards:

By 2030, many African nations could realistically say their populace had access to the most basic needs aforementioned. As stressed, no one approach was adopted by all; each country went about achieving this basic development depending on the structures already in place. For many countries, this required finding a balance between the private sector development and government intervention. For development to become a possibility, the government first had to reach out to these areas before the private sector could enter the market. The government first established health care, supplemented nutrition, and education systems that would help bring rural children into the world of health, literacy, and modern technology. To accomplish all of this, the government enlisted the help of the private sector to physically make these things possible. The government paid firms to construct buildings, provide food, create schools, build infrastructure, and also train and employ the people necessary for the upkeep of these facilities, which included teachers, custodians, cooks, doctors, nurses, and technicians. This allowed development to occur toward a specific goal—higher standards of living for everyone—while still allowing the market to operate efficiently and stimulate economic activity.

Luisa Wu of Taiwan argues that this progress in living standards was helped by innovation in health care:

In 2050, it is very possible that a treatment for wiping out HIV in the human body would have been found. Recent research have found that patients who accept stem-cell transplants unexpectedly get rid of the HIV virus in their bodies. Although stem-cell transplant will not directly become a treatment because of its extremely expensive cost, scientists will learn from these stem cell transplant cases and find a treatment.


And, finally, US-student Kristin Buhrow notes South Africa’s role in the future history of Africa:

Initiative in research and government policy has positioned South Africa as not only the “Gateway to Africa” but Africa’s gateway to the world through its progressive vision of continual development.  With careful action and a continued focus upon education, trade, and infrastructure, the growth exhibited in the past forty years will not stop for many years to come, and the goal of African development, equality, health, and economic growth will be reached by way of continual, gradual advancement in many fields.

Are these pipe-dreams or the blueprint of our future?

PS: I help coordinate a Doing Business in Southern Africa five-week course at Stellenbosch University every July. The course brings together academics from various fields and includes several field trips to companies and incubators. Visit our International Office Summer School page for more information.

Written by Johan Fourie

July 18, 2013 at 07:37