Johan Fourie's blog

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Posts Tagged ‘South African tourism

Who are most hurt by South Africa’s new visa regulations?

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No buyers, no job: Women at the Khayelitsha craft market rely on large numbers of tourists to make a living

No buyers, no job: Women at the Khayelitsha craft market rely on large numbers of tourists to make a living

At the beginning of June, South Africa imposed two new visa regulations for families traveling to South Africa. The first was that any child who exits the country must have an unabridged birth certificate if they are to enter the country. The second was that tourists from countries that are required to have a visa now have to appear in person during the visa application process in order to obtain a biometric visa.

New data published by Statistics South Africa at the end of last month show that these policies are beginning to have an effect. A notice about the new regulations issued more than a year ago resulted in a decline in tourist arrivals between March 2014 and March 2015 of 68 323 travellers, or 20%. Air China cancelled a planned direct route between China and South Africa. To put these numbers into perspective: the 2010 World Cup in South Africa generated approximately 300 000 additional (non-SADC) tourists in the year of the event, or an increase, controlling for the trend, of 18.7% (Peeters, Matheson and Szymanski 2014). The notice warning travellers about new visa regulations – note: not the actual regulations themselves, the impact of which we will only know later this year – has thus already nullified the impact of the 2010 World Cup, a mega-event that cost us several billion to host (and continues to be a burden for tax payers). That is an absolute travesty.

Whether the decline in tourist numbers can be entirely attributed to the new visa regulations is of course not clear. Last year’s Ebola epidemic in West Africa (and, dare I add, the United States) would have affected foreign travellers’ plans, while the xenophobic attacks a few months ago in Durban and Johannesburg certainly changed visitor itineraries. The latter was perfectly illustrated by an international winter school I teach at Stellenbosch University: almost all of the Singaporean students (half the class) who would have attended the course cancelled their trips in the week following the xenophobic attacks. The sad reality is that the revenue we generate from these courses go to Stellenbosch students applying for exchanges in Europe and elsewhere; the xenophobic attacks has denied dozens of South African students the opportunity to study abroad.

And on top of all this comes the new visa regulations. The aim, according to the Department of Home Affairs, is to prevent child trafficking across South Africa’s borders. When questioned about the number of trafficking cases that the new policies has prevented, department spokesperson Mayihlome Tshwete said yesterday: “Child trafficking is difficult to detect but whether the number is five or 10 or 30 000, there is no denying that child trafficking is a reality in South Africa and we can’t tell the parents of trafficked children that their children aren’t important.”

Child trafficking is an incredible injustice. The stories of those caught in its grip are traumatizing. But so, too, are the stories of mothers who lose their jobs. The new visa regulations will result (or have already) in the lay-off of thousands of mothers (because the tourism industry mostly employ women and often poor, rural women). These mothers will be unable to feed and support their children, the very same children that are supposed to benefit from the policy. But will we hear stories about these mothers? Probably not. The causal link between the new policy and their job security is vague; the only message they get is that they don’t need to come to work anymore because ‘in the light of the current business climate, the company is forced to retrench’.

Everything has a price. Yes, even the life of a child trafficking victim. (Bear in mind that since 2012 the South African Police has only opened 23 cases of child trafficking.) Politicians and bureaucrats continually have to decide between spending on hospitals (which clearly reduce deaths) and other types of spending, like teacher salaries. If human life is infinitely valuable, then we should spend our entire budget on clinics and hospitals. But we don’t. We trade off lives saved in hospitals versus other priorities, like maintaining a well-functioning economy.

Similarly, we cannot price two dozen child trafficking cases more valuable than protecting thousands of jobs in the tourism industry. If we do, many more children will suffer as a result.

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Counting tourists

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(c) Johan Fourie

Counting tourists: The Cape Town Fan Walk during the 2010 FIFA World Cup

Victor Matheson, Thomas Peeters and Stefan Szymanski author a recent paper that attempts to measure, using monthly data of South African tourist arrivals, the impact on tourism from the 2010 FIFA World Cup. Matheson and Szymanski are two guru’s in the field of sports economics and are known for their pessimism of ex ante studies that attempt to estimate the potential economic impact of mega-events. And we had a lot of those in South Africa: already in 2003, a Grant Thornton study had optimistically predicted that more than half a million visitors from outside Africa would visit South Africa during the event, staying an average of 15 days.

The new paper confirms the authors’ pessimism about ex ante studies: it shows that only 193,323 additional, non-SADC tourists visited South Africa during the event, which is far below the government’s estimate of 309,554. Given that the event cost the South African government an estimated $3.9 billion (I’m not sure where the authors get this figure), they calculate that the average “World Cup” tourist was priced at a steep $19,500.

The authors use a standard methodology (similar to a paper that Karly Spronk and I used a while ago) and include several economic variables as controls. I liked the grouping of countries based on the size of their tourist arrivals. But they make a number of assumptions which I think does bias their results towards the more pessimistic perspective.

They exclude, for example, SADC visitors, based on the fact that “those travelling from SADC nations are generally not the high spending tourists that South Africa was seeking to attract during the World Cup”. This is not a great argument. Would we exclude the visitors from Latin America for the 2014 World Cup in Brazil simply because they do not spend as much as their European counterparts? I suspect not. With African countries growing at massive rates, tourist visits to South Africa are becoming important luxury consumption items, even if it is only for visiting friends and relatives, or for doing some shopping. Maria Santana-Gallego and I have made this same argument elsewhere. In fact, when including SADC arrivals, the estimated number of tourist arrivals during June/July increases to 271,000, a boost of nearly 80,000.

Because 2011 economic data was not yet available, the authors also restricted their analysis to only include 2010 and earlier years. Where they do include data for 2011, the results are significantly different. For example, I’ve reported above results from model 1. If model 2 is used, the 271,000 visitors rise to 391,000 visitors, an increase of 44%. Moreover, the authors consider both tourist arrivals during the duration of the event (June/July) and during the entire year. They find, for example, that while tourism increased by 271,000 visitors during the World Cup tournament, 627,000 total additional visitors arrived during the year (1,3 million according to their model 1). In the conclusion, the authors note that “we estimate the total impact of the World Cup on visitors to South Africa in 2010 to be as high as 490,135”, slightly more optimistic than the 8% average for mega-events Maria and I calculate in our Tourism Management paper.

I suspect the authors were surprised by these numbers, as identifying displacement – where tourists that would have visited the country in the absence of the event – is the Higgs Boson of the mega-event literature. (Spronk, Sieberts and I also attempted to find evidence of this with South African data.) But few tourists were displaced by the 2010 FIFA World Cup and there are several reasons for this: the event was held during our winter (off-peak) season, which meant that there were few constraints on our transport and accommodation infrastructure. Also, several countries that were not our traditional tourism markets participated in the event, drawing tourists that would not typically have considered South Africa as a tourist destination (the authors mention the rise of Latin American tourists, for example, and I think this is an important point when considering whether to host a mega-event). The luck of the qualification round, and the actual match outcomes, also play a role: had Russia qualified instead of tiny Slovenia (a difference of one away goal!), we might have seen a significant number of additional tourists. A similar case could be made for Egypt instead of Algeria, or China instead of North Korea. Also, had England and Germany progressed to the final, imagine the boost to tourist arrivals over the last few weeks of the tournament.

The paper makes a valuable, first contribution to measuring the ex post impact of hosting the 2010 FIFA World Cup on tourist arrivals to South Africa. Surely there will be many more. But rather than just counting tourists, we would do well to also focus on the underlying causes (policy or luck?) of these tourist arrival patterns.

Written by Johan Fourie

August 31, 2012 at 09:20

Welcome to Stellenbosch

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(c) Jaco le Roux (www.jacoleroux.com)

With the World Economic History Congress 2012 kicking off in two days, the more than 800 delegates have begun arriving in the not-so-summery Stellenbosch. (The above photo, by Jaco le Roux, is a good example of the type of weather we’re wishing for.) The WEHC2012 is, of course, an exciting event for economists and historians on the African continent: not only is it the largest such conference ever held on African soil (nearly 800 papers will be delivered over five days in 15 parallel sessions), but it also the leading lekgotla for some of the most acclaimed international economic historians. With the conference theme “The Roots of Economic Development, the opening morning plenary, by James Robinson, co-author of Why Nations Fail, is sure to stimulate debate about the importance of political institutions as a causal determinant of economic development. So, too, will the debate between James and Gareth Austen on the root causes of African development on Friday afternoon. In-between, I look forward to some really interesting sessions, particularly the Presidential Session on “Inequality and the Quality of Life” (Wednesday morning, Arts building 229), the Economics of Civil War (Tuesday afternoon, Arts building 225) and two sessions of Economics and Causation in History on Friday. But there are sessions for everyone’s taste: from “Transnational Marriage Markets and Migration” (Friday afternoon, Arts building 229) and “Fashion and Economic Development” (Tuesday morning, Arts building 228), to “The Value of Used Goods” (Wednesday afternoon, Arts building 220) and “Global Land Grabbing and Food Security in Africa” (Friday morning, Arts building 220). The programme is available here.

I’ll also present a couple of papers: A session co-organised by Erik Green (Lund University), Ewout Frankema (Utrecht University) and myself will investigate the colonial causes of development and underdevelopment. We have invited papers covering diverse geographic areas, including Haiti, Tanzania, the Spanish Philippines, Mexico, Botswana and my own work on the Cape Colony. Join us in Room 226 (Arts building) on Tuesday afternoon. I’ll also present a paper on Cape living standards in Leigh Gardner’s session on “Living Standards in Africa” on Wednesday morning (Ou Hoofgebou 2027), and in Joerg Baten and Alex Moradi’s session on “Human capital and Development in Africa and Latin America” on Wednesday afternoon (Arts building 223). Finally, I’ll present some new ideas about Cape Colony fiscal policies (co-authored with Ada Jansen and Krige Siebrits) on Thursday morning in Ewout Frankema and Anne Booth’s session on “Colonial Fiscal Policies” (Ou Hoofgebou 1017).

The organisation of such a conference is a massive undertaking, and without the help of African Agenda, I’m not sure it would have been possible. Aside from the formal academic sessions, there are a host of other activities, like a book launch, a welcome dinner (at Moyo, Spier) and a cultural evening (in City Hall). And I’m sure some delegates will find some time for a wine-tour or two. Incidentally, there’s also the annual Stellenbosch International Chamber Music Festival running concurrently, so delegates in the mood for cultural enrichment should certainly consider attending a show.

We’re excited and ready to go. Let’s hope the weather plays along.

PS: If you’d like to keep abreast of news and conference updates, follow our Twitter account @wehc2012.

Explaining African tourism

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(C) Isabel Lundin

Elephants in Zambia: That's me snapping some photos in the South Luangwa National Park, one of the best (if not the best) game reserve I've visited. Photo by Isabel Lundin.

I was fortunate to share a platform last week with Deputy Minister of Tourism, Thokozana Xasa, and SAA CEO, Siza Mzimela on the topic of tourism in Africa at the Africa Dialogue conference. Moderator Thebe Ikalafeng (Chairman of Brand Africa) fired off the discussion by asking Ms. Mzimela why it is that SAA (again) requested R6 billion from the Treasury. Her response – that SAA would like to expand its activities in Africa which will require large capital investment, capital which will be sourced from the capital markets with the R6 billion used as collateral – was to the point and clear, a sign that SAA may be turning the tide.

I was asked several questions about some (provocative) statements in my research papers (i.e. that African tourists are similar to foreign tourists visiting Africa). With limited time to explain the context and methodology, I focused rather on what my results could add to the discussion. I had prepared a short introduction, though, and thought it good to repeat it here (with links to the appropriate papers).

Tourism research in South Africa is a relatively new field, although there are some strong schools (such as those at North-West University Potchefstroom campus) that is doing invaluable micro-economic research. I come from a trade background, and first became interested in tourism when I calculated South Africa’s revealed comparative advantage in various goods and service sectors. Travel service exports (mode 2 is tourism) was the only service sector that revealed a strong comparative advantage. I investigate the reasons for this persistent advantage over time in a paper published last year.

I also calculated tourism RCAs for other African countries. I found that a number of African countries for which 2006 data is available reveal comparative advantages in tourism. Four interesting trends are observed: first, the island economies of Mauritius, Reunion, Seychelles, Cape Verde, etc all have, as expected, large RCAs. The three northern African countries of Egypt, Tunisia and Morocco also attract a lot of tourists relative to trade in other trade sectors, probably because of their proximity to Europe. Most interestingly, a band of countries running from South Africa to Ethiopia on the East coast of Africa all achieve relatively strong comparative advantages. (Zimbabwe should also be included here, but its political problems have eliminated its advantage – and data.) Finally, a group of countries in West Africa – especially those landlocked – also reveal (weak) comparative advantages in tourism.

Of course, the next step is to identify the causes of this advantage. The full results will soon be published in a co-authored article with Leon du Toit, but a Working Paper is available. I think there are four interesting findings. First, natural and cultural resources seem to matter a lot in explaining the advantage. We test this with a number of variables – the UNESCO World Heritage sites, size of protected area and length of coastline, to name a few. The coefficients are large and significant, suggesting that African countries should put greater value on their environmental and cultural resources. Second, some variables that we think might be important does not come out statistically significant. Crime is the most obvious example here; most reports on tourism emphasise the adverse affects of (perceived) crime on a country’s tourism industry. We interpret the insignificance in the following way: while crime will have an adverse effect on tourism, it probably also has adverse effects on other trade sectors. Thus, tourism is not disproportionately more affected by high crime than other sectors. Third, we show that something like a neighbourhood effect exists; countries, on average, have a higher RCA if their neighbours also have a high RCA. Political tension in a neighbouring country might thus affect a tourism industry in the stable country worse than other trade sectors. This also give rise to some policy suggestions: why not reduce the costs of moving between countries for tourists, like a UNIVISA for SADC countries as has been proposed before (and at the Africa Dialogue conference)? Finally, we find that relative transport costs (air over sea) matter. While air transport to African countries is expensive relative to Asia, it is less expensive than sea transport to Africa vis-a-vis Asia. Landlocked countries in Africa – as can be seen from the map – would do well to focus on the tourism industry, especially smaller countries like Lesotho and Swaziland. Rwanda and Uganda already have a strong comparative advantage. This final result also suggest at least two policy interventions: reduce the costs of air travel further (why not open air travel to chartered flights from Europe?), and relax policies that may hinder tourism developed, especially in the poorest landlocked countries. Having traveled to Lesotho (see below), I have seen the limited availability of good tourism infrastructure in that country. This is probably as a result of institutional constraints: the system of property rights, the difficulty of land acquisition for foreigners, and similar issues restrain the development of what might be a highly successful tourism industry, especially given its location within the borders of a country where tourism is already well-developed.

These are just some of the ideas of my first work in tourism. I have also compared within-African tourism with inbound-African tourism (see below and here), have investigated the impact of the World Cup on tourist arrivals (with Maria Santana-Gallego, see here and here), and estimated the impact of international students studying at Stellenbosch University (with Emile du Plessis, see here). Most recently, I’m busy with an exciting project that investigates the impact of historical migration on tourism. But more on this later.

Tourism is an exciting research area. It is also an important economic sector in the South African economy, accounting for a larger share of GDP than agriculture, for example. We thus need to expand our understanding of its causes and consequences, and hopefully arrive at policy suggestions that will allow the tourism industry, especially in small, landlocked African countries, to take off.

Tourism in Africa

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(c) Johan FourieWhen we talk about tourists in South Africa, we tend to think of uppish Northern Europeans and loud Americans. We might also think of large groups of Japanese or Chinese tourists exhibiting Sony’s technological frontier. In a recent working paper, María Santana-Gallego and I argue that this view is only half-true: African tourists are an important component of South African tourism statistics and that this is a potentially large export market for South African travel services (see figure, showing Africans as proportion of total tourist arrivals).

We use a standard panel gravity equation of 175 origin/destination countries between 1995 and 2008, 37 of which are African, to identify the factors that drive African-inbound (arrivals to Africa from other continents) and within-African tourism (arrivals from and to an African country). The determinants of African-inbound and within-African tourism are fundamentally not all that different from global tourism flows; repeat tourism, income, distance, land area and the standard dummy variables (such as language, border and colonial effects) not only drives global or OECD tourism, but also tourism within Africa.

Given the proximity of other African countries to South Africa, and the rapid rise in African incomes, don’t be surprised if, over the next few years, other tourism stereotypes emerge: the African businessman, African shopper or African happy-snapper on safari in Kruger.

Written by Johan Fourie

March 7, 2012 at 20:54